UFP Industries
Annual Report 2017

Plain-text annual report

Report to Shareholders 2017 Even if you’re on the right track, you’ll get run over if you just sit there. ― Will Rogers To our Shareholders: Every year at Universal Forest Products, we choose a theme that helps us frame the year ahead. For 2017, it was Learn it. Earn it. Own it. Or LEO. With the ferocity, stealth and determination of a lion, our employees did just that: they learned what they needed to know to improve over the previous year’s performance, they earned the opportunity to do more through their success, and they owned their results in 2017. It was a good year, a record-breaking year in fact. But, it wasn’t our best—that’s yet to come. And that is what motivates us, day in and day out: the knowledge that we can do better, and create more opportunity and value for all of our stakeholders. Our 2018 theme, >B4, is about the competitiveness and motivation of not just wanting to win, but hating to lose. We strive for perfection, recognizing that if we don’t set a high standard, we certainly won’t reach it. On the pages of this annual report, you will learn all about the numbers that illustrate our success, so in this letter, we’d like to highlight a few other things. Like our culture. Each of us has been associated with Universal for decades—nearly four for Matt and nearly five for Bill. Throughout that time, we have hired countless people who have built lifelong careers with the Universal family. Our coworkers became our best friends, toughest critics and biggest supporters. We encourage each other to reach for more, and we can be brutally honest when things need improving—because we want everyone to be their best and to have as much responsibility and reward as they can earn. That’s our culture. We are big and growing. We are international. Yet we are tightly knit. We genuinely care about our company and each other. It makes coming to work every day enjoyable, even on the toughest days. We work hard to bring in people who will continue that culture and our traditions. A few years ago, we started UFP Business School’s two-year degree program. It is based on a four-year business degree program, but with only the business courses. The instructors are our professionals. Students are in class 10 hours a week and in paid internships for 20 hours a week. The company underwrites the cost of the program. Those who successfully complete it get jobs at Universal affiliates. That is not a requirement of enrollment, but it is our belief that students will like it so much that they will stay. If our ii first class is any indication, we are right: all students who are graduating this summer are staying to build careers at Universal. They have every opportunity to be leaders long after we are gone. Jake W., Class of 2018: The people of UFP have built a company culture that … made me realize very quickly that I wouldn’t want to build a career anywhere else. Molly J., Class of 2019: All the instructors … have real-world experience that makes classes interesting and useful. I will be able to take what I learn and incorporate it into my future at UFP. Calvin C., Class of 2018: Every day in my internship, I am completing tasks for the company that make a difference, that give me something to be proud of. The people here incorporate me into their departments and teach me, rather than just give me “typical intern” work. This is a great opportunity to get a head start in your career without a cost to you. These are just the newest members of a team that is made up of hard-working professionals who care about what we do, how we do it and what kind of company we are. There are approximately 11,000 people in the companies of Universal on four continents. Some of our operations have a few hundred people; some have a dozen. All are bound by the values that define us and our work: Honesty and integrity. Innovation. Ferocity. Determination. Fun. A solid work ethic. Our people are our story. They are responsible for the numbers. In 2013, we said we wanted to be a $3 billion company by the end of 2017. Well, we ended the year with net sales of $3.94 billion (and gross sales of $4.0 billion), which was 22 percent better than 2016. And we achieved record net earnings attributable to controlling interests of $119.5 million, up 18 percent over 2016. Unit sales accounted for 15 percent of our gross sales growth; price increases accounted for 7 percent. These achievements deserve strong praise, but we are not satisfied. We didn’t achieve some of our own internal goals, and we’re determined to change that for 2018. One of our strategic objectives has been a focus on new product sales growth, and we had great success in 2017, increasing new product sales 23.5 percent over 2016, to $418.4 million. Among our exciting successes has been the popularity of our UFP-Edge rustic shiplap products and our Deckorators decking products and accessories. On the international business front, we sold more new products manufactured by UFP North American affiliates to offshore customers and continued to grow our list of exported and imported products (for example, we increased exports of UFP Edge and of American hardwoods, and imported products from around the globe). We successfully exported products from existing Universal vendors, growing our opportunity to do new business with them, and we saved hundreds of thousands of dollars through procurement enhancements and synergies in our overseas operations, among other things. iii In 2017, our E-commerce group finished its first full year as an independent team focused on creating and growing our business with our customers through digital channels and opportunities. Also in 2017, we added the operations of four businesses to the Universal family of companies:  Quality Hardwood Sales, of Nappanee, Ind., is a manufacturer and supplier of hardwood products including components for cabinets used in homes and recreational vehicles, adding hardwood products to our portfolio.  Robbins Manufacturing Co. is a manufacturer of treated wood products that helped us expand our presence in the Southeast United States.  Go Boy Pallets, a manufacturer and distributor of industrial pallets and packaging for the Georgia and North Carolina markets, expanded our product offering and lumber sourcing in that region.  Silverwater Box, a packaging solutions company in the Sydney, Australia suburb of Girraweek, helped advance our goal of becoming the leading global provider of packaging solutions in the products we offer. Our balanced business model makes us unique, sometimes hard to understand, and more resilient than most to market fluctuations. It allows us to use all grades of wood for our products, making us an attractive customer for the world’s largest mills. And it provides many avenues for growth in new markets and with new products. It has been a strong foundation on which to build over the decades and continues to be a competitive advantage. Today, we serve three robust markets and saw these results in 2017: Retail. Gross sales of $1.49 billion were up 15 percent over 2016, led by a 10 percent increase in unit sales and a 5 percent increase in selling prices. In our retail business, we sell hundreds of products ranging from decking, fencing and accessories to loose lumber. Among our products and brands are ProWood® lumber (www.prowoodlumber.com), Deckorators® decking and accessories (www.deckorators.com), the shiplap siding and trim boards in our UFP-Edge portfolio (www.ufpedge.com), and lattice and panel products sold under our Dimensions™ brand (www.dimensionsdiy.com). Sales to this market were affected by a record hurricane season, which resulted in a temporary increase in sales of low-margin commodity products. While the temptation for many is to take advantage of need in the face of natural disasters, our philosophy is the opposite: we hold our prices as people struggle to prepare themselves for disaster. We can’t imagine making a bad human situation worse. Industrial. Gross sales of $1.33 billion for 2017 represented an increase of 35 percent over the previous year. Unit sales increased 29 percent, primarily due to the Company’s acquisition of idX Corporation in September of 2016. Excluding acquisitions, the Company’s organic unit sales grew 4 percent over 2016. In this market, we supply specialty crates and packaging to multiple industries, as well as components for products, like wood frames for mattresses and furniture. It’s a strong opportunity not just for maximizing iv our design and production expertise, which often must accommodate intricate needs for protecting and transporting goods, but also for using raw material that otherwise would have been waste. Construction. We saw $1.18 billion in gross sales for 2017, up 16 percent over 2016, driven by a 7 percent increase in unit sales and a 9 percent increase in prices. Residential construction unit sales grew 7 percent, and unit sales to manufactured housing customers rose 9 percent over 2016. Residential construction includes traditional site-built single-family and multifamily construction, factory-built homes (both HUD-code and modular homes), commercial construction and concrete forming. We couldn’t achieve any of this without great people. As is true for other American corporations, changes in tax laws will lower taxes for us in 2018. Instead of using the tax savings for a one-time bonus, we will use approximately one-third of it to enhance our compensation and benefits package for employees, with a special emphasis on hourly production employees (the rest will be used on strategies to grow the company and to provide a return to shareholders). We are working with employees to select options that meet the differing needs and desires of our workforce. We want to make sure to provide our people with good pay and benefits in a way that is more valuable to them and their families. As our company grows and succeeds, we want our people to share in the value they help create, so we provide them with opportunities to invest in their company. Do many of our people build wealth in the process? We hope so. That’s the American Dream. People of modest means who have determination, ability and a willingness to work hard can achieve it. Both of us are grateful examples of that, and we are determined to help as many others as possible achieve the dream. It is the reason for our business school (not all paths to success include a costly degree from a four-year institution), for training programs and career paths at Universal and for our hire-from-within-first philosophy for those who prove themselves through hard work and success. It is our privilege to help others achieve their goals, and it is those practices and our strong culture that make us different and, we believe, better. We love this company and the principles on which it was founded. We are grateful to this country for a free enterprise system that allows people and companies to compete and prove their worth based on their merits, and that allows people to determine worthy investments. We are honored that you deemed Universal a worthy choice, and we are focused on making sure you remain pleased with your investment in us. Cordially, William G. Currie Chairman of the Board Matthew J. Missad Chief Executive Officer v UNIVERSAL FOREST PRODUCTS, INC. FINANCIAL INFORMATION Table of Contents Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Annual Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 30, 2017 and December 31, 2016 Consolidated Statements of Earnings and Comprehensive Income for the Years Ended December 30, 2017, December 31, 2016, and December 26, 2015 Exhibit 13 2 3-23 24 25 26 27 28 Consolidated Statements of Shareholders’ Equity for the Years Ended December 30, 2017, December 31, 2016, 29 and December 26, 2015 Consolidated Statements of Cash Flows for the Years Ended December 30, 2017, December 31, 2016, and 30 December 26, 2015 Notes to Consolidated Financial Statements Price Range of Common Stock and Dividends Stock Performance Graph Directors and Executive Officers Shareholder Information 31-54 55 56 57 58 SELECTED FINANCIAL DATA (In thousands, except per share and statistics data) 2017 2016 2015 2014 2013 Consolidated Statement of Earnings Data Net sales Gross profit Earnings before income taxes Net earnings attributable to controlling interest Diluted earnings per share Dividends per share Consolidated Balance Sheet Data Working capital(1) Total assets Total debt Shareholders’ equity Statistics Gross profit as a percentage of net sales Net earnings attributable to controlling interest as a percentage of net sales Return on beginning equity(2) Current ratio(4) Debt to equity ratio(5) Book value per common share(3) $ 3,941,182 542,826 176,007 $ 119,512 1.94 $ 0.320 $ $ 560,241 1,464,677 146,003 974,023 $ 3,240,493 474,590 160,671 $ 2,887,071 399,904 131,002 $ 2,660,329 325,342 95,713 $ 2,470,448 280,552 70,258 $ 101,179 1.65 $ 0.290 $ $ $ $ 80,595 1.33 0.273 57,551 0.95 0.203 $ $ 43,082 0.72 0.137 $ $ $ 484,661 1,292,058 111,693 860,466 $ 444,057 1,107,679 85,895 766,409 397,546 $ 1,023,800 98,645 699,560 $ 357,299 916,987 84,700 649,734 13.8 % 14.6 % 13.9 % 12.2 % 11.4 % 3.0 % 13.9 % 2.85 0.15 15.92 $ 3.1 % 13.2 % 2.78 0.13 14.10 $ 2.8 % 11.5 % 3.17 0.11 12.68 $ 2.2 % 8.8 % 3.27 0.14 11.67 $ 1.7 % 7.1 % 3.59 0.13 10.86 $ (1) Current assets less current liabilities. (2) Net earnings attributable to controlling interest divided by beginning shareholders’ equity. (3) Shareholders’ equity divided by common stock outstanding. (4) Current assets divided by current liabilities. (5) Total debt divided by shareholders’ equity. Acquisition growth is the primary contributing factor to material increases over the period from 2013 to 2017. Refer to Note C under the“Notes to the Consolidated Financial Statements” for further discussion on the Company’s business combinations and impact on financials. 2 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Universal Forest Products, Inc. is a holding company with subsidiaries throughout North America, Europe, Asia, and in Australia that supply wood, wood composite and other products to three robust markets: retail, industrial, and construction. The Company is headquartered in Grand Rapids, Mich. For more information about Universal Forest Products, Inc., or its affiliated operations, go to www.ufpi.com. This report 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, events, or assumptions 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 economic 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. We are pleased to present this overview of 2017. Our results for 2017 were impacted by the following: OVERVIEW  Our sales increased almost 22% in 2017 due to a 15% increase in our unit sales and a 7% increase in overall selling prices (see “Historical Lumber Prices”). Our unit sales increased in all three of our markets - retail, industrial, and construction - and were driven by a combination of acquisition and organic growth. Overall, businesses we acquired contributed 11% to our unit sales growth in 2017 (see Note C of the Notes to Consolidated Financial Statements) and we achieved 4% organic unit sales growth. In 2016, we had 53 weeks in our fiscal year which contributed an additional $60 million of sales compared to 2017, which was a 52 week year (See Note A of the Notes to Consolidated Financial Statements).  The Home Improvement Research Institute reported a 5% increase in home improvement sales in 2017. Comparatively, our unit sales to the retail market increased 10% in 2017, including approximately 7% contributed from acquired businesses.  Our sales to the industrial market increased 35% in 2017. Businesses we acquired contributed 25% to unit sales growth. Comparatively, the Federal Reserve’s Industrial Production noted that national industrial production increased less than 1% in 2017.  National housing starts through November 2017, compared to the same period of the prior year (our sales trail housing starts by about a month). Comparatively, our unit sales to residential construction customers increased 7% in 2017. the period from December 2016 increased approximately 4% in  Production of HUD code manufactured homes were up 16% in the period from January through November 2017, compared to the same period of the prior year. Comparatively, our unit sales to the manufactured housing market increased 9% in 2017. 3 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  Our earnings from operations increased 10.4% to $181.5 million in 2017 from $164.4 million in 2016. Acquired businesses contributed $6.7 million to our increase, which was below our expectations primarily due to idX. The remaining $10.4 million, or 6.3%, increase was primarily driven by our organic unit sales growth and a decline in our incentive bonus expense due to a decrease in our return on investment which is a key performance metric for determining incentive bonus payments.  Finally, the Tax Act, as defined in Note K to our 2017 Annual Financial Statements, resulted in a $6.4 million decrease to our net deferred tax liability and income taxes in 2017. Excluding the impact of the Tax Act, our net earnings attributable to controlling interest was $113.1 million, compared to $101.2 million in 2016, an 11.8% increase.  Our cash flow from operating activities decreased to $137 million due to an increase in our investment in working capital resulting from higher year over year lumber prices in the fourth quarter of 2017 compared with the fourth quarter of 2016 as presented in the tables below. The following table presents the Random Lengths framing lumber composite price. HISTORICAL LUMBER PRICES Random Lengths Composite Average $/MBF 2016 2015 2017 January February March April May June July August September October November December Annual average Annual percentage change $ 356 393 401 424 416 399 411 417 416 437 436 433 $ $ 316 310 321 345 356 353 351 367 354 356 346 357 $ 412 $ 19.8 % 344 $ 3.9 % 379 361 339 334 315 328 346 327 300 308 326 314 331 4 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In addition, a Southern Yellow Pine (“SYP”) composite price, which we prepare and use, is presented below. Our purchases of this species comprises approximately 44% and 43% of total lumber purchases for 2017 and 2016, respectively. January February March April May June July August September October November December Annual average Annual percentage change Southern Yellow Pine Average $/MBF 2016 2017 2015 $ 397 420 433 438 416 399 381 383 387 417 412 418 $ $ 358 357 366 389 397 382 380 391 375 385 387 400 $ 408 $ 7.1 % 381 $ 6.4 % 411 399 393 400 368 354 344 321 290 318 348 347 358 The significant increases in lumber prices from 2016 to 2017 can primarily be attributed to the following factors:  Duties on imported lumber from Canada - The U.S. Department of Commerce has preliminarily determined that subsidies are being provided to producers and exporters of certain softwood lumber products (softwood lumber) from Canada and duties are being assessed ranging from 7% to 23%.  Canadian Wildfires - In 2017, British Columbia experienced its worst wildfire season in history which impacted the producers and exporters of lumber products.  Hurricanes Irma and Harvey - Caused catastrophic damage in parts of the U.S. and the Caribbean. The necessity for lumber to prevent and repair hurricane damage resulted in a surge in lumber demand during the third and fourth quarters of 2017. 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 were 49.1%, 48.4%, and 48.9% of our gross sales in 2017, 2016, and 2015, respectively. Our gross margins are impacted by (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 5 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 retail building materials customers, as well as trusses, wall panels and other components sold to the residential 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 with our suppliers for these sales commitments. Also, the time period and quantity limitations generally allow us to eventually 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 we 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. The greatest risk associated with changes in the trend of lumber prices is 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 19% 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 our higher rate of inventory turnover of these products. 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 or including re-pricing triggers if lumber prices change in excess of an agreed upon percentage. 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. Lumber cost Conversion cost = Product cost Adder = Sell price Gross margin Period 1 $ $ 300 50 350 50 400 $ 12.5 % Period 2 400 50 450 50 500 10.0 % $ 6 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 and operating margins are negatively impacted during periods of high lumber prices; conversely, we experience margin improvement when lumber prices are relatively low. As a result of this factor, we believe it is useful to compare our change in units shipped with our change in gross profits, operating profits, and selling, general, and administrative expenses as a method of evaluating our profitability and efficiency. BUSINESS COMBINATIONS AND ASSET PURCHASES We completed four business acquisitions during 2017 and six during 2016. The annual historical sales attributable to acquisitions in 2017 and 2016 were approximately $127 million and $362 million, respectively. These business combinations were not significant to our operating results individually or in aggregate, and thus pro forma results for 2017 and 2016 are not presented. See Notes to Consolidated Financial Statements, Note C, "Business Combinations" for additional information. The following table presents, for the periods indicated, the components of our Consolidated Statements of Earnings as a percentage of net sales. RESULTS OF OPERATIONS Year Ended Net sales Cost of goods sold Gross profit Selling, general, and administrative expenses Earnings from operations Other expense (income), net Earnings before income taxes Income taxes Net earnings Less net earnings attributable to noncontrolling interest Net earnings attributable to controlling interest December 30, December 31, December 26, 2016 100.0 % 85.4 14.6 9.6 5.1 0.1 5.0 1.7 3.3 (0.1) 3.1 % 2017 100.0 % 86.2 13.8 9.1 4.6 0.1 4.5 1.3 3.1 (0.1) 3.0 % 2015 100.0 % 86.1 13.9 9.2 4.7 0.2 4.5 1.6 2.9 (0.2) 2.8 % Note: Actual percentages are calculated and may not sum to total due to rounding. GROSS SALES We design, manufacture and market wood and wood-alternative products for national home centers and other retailers, structural lumber and other products for the manufactured housing industry, engineered wood components for residential and commercial construction, specialty wood packaging, components and packing materials for various industries, and customized interior fixtures used in a variety of retail stores, commercial and other structures. Our strategic long-term sales objectives include:  Maximizing unit sales growth while achieving return on investment goals 7 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  Diversifying our end market sales mix by increasing sales of specialty wood packaging to industrial users, increasing our penetration of the concrete forming market, increasing our sales of engineered wood components for custom home, multi-family, military and light commercial construction, increasing our market share with independent retailers, and increasing our sales of customized interior fixtures used in a variety of markets.  Expanding geographically in our core businesses, domestically and internationally.  Increasing sales of "value-added" products, which primarily consist of fencing, decking, lattice, and other specialty products sold to the retail market, specialty wood packaging, engineered wood components, customized interior fixtures, 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.  Developing new products and expanding our product offering for existing customers. New product sales were $418.4 million in 2017, $338.6 million in 2016, and $298.0 million in 2015 and are presented by market in the table below (in thousands). Market Classification Retail Industrial Construction Total New Product Sales $ New Product Sales by Market Twelve Months Ended December 31, 2016 191,619 97,718 49,290 338,627 $ $ December 30, 2017 241,009 109,892 67,536 418,437 December 26, 2015 167,938 77,723 52,378 298,039 Note: Certain prior year product reclassifications resulted in a decrease and increase in new product sales in 2016 and 2015, respectively. The following table presents, for the periods indicated, our gross sales (in thousands) and percentage change in gross sales by market classification. December 30, % December 31, %  December 26, Year Ended Market Classification Retail Industrial Construction Total Gross Sales Sales Allowances Total Net Sales 2017 $ 1,493,366 1,334,082 1,178,755 4,006,203 (65,021) $ 3,941,182 Change 2016 Change 2015 15.4 $ 1,294,273 984,968 35.4 1,018,136 15.8 3,297,377 21.5 14.3 (56,884) 21.6 $ 3,240,493 13.8 $ 1,137,109 890,179 10.6 12.5 905,193 2,932,481 12.4 25.3 (45,410) 12.2 $ 2,887,071 Note: During 2017, certain customers were reclassified to a different market. Prior year information has been restated to reflect these changes. 8         UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table presents estimates, for the periods indicated, of our percentage change in gross sales which were attributable to changes in overall selling prices versus changes in units shipped. 2017 versus 2016 2016 versus 2015 2015 versus 2014 Retail: % Change in Sales in Selling Prices 6.6 % 21.5 % 1.2 % 12.4 % (3.0)% 8.5 % in Units 14.9 % 11.2 % 11.5 % Gross sales to the retail market increased over 15% in 2017 compared to 2016 due to a 10% increase in unit sales and a 5% increase in selling prices. Within this market, sales to our big box customers increased 16% while our sales to other retailers increased 14%. Businesses we acquired contributed 7% to our growth, while new products contributed to our 3% organic unit sales growth. Comparatively, our large retail customers reported year over year same store sales growth of approximately 8% during the first nine months of 2017, the latest information available to us. Gross sales to the retail market increased almost 14% in 2016 compared to 2015 due to a 10% increase in unit sales and a 4% increase in selling prices. Within this market, sales to our big box customers increased 17% while our sales to other retailers increased 10%. Our increase in unit sales primarily consisted of organic growth achieved through a combination of share gains in existing product lines with certain retailers, an improvement in consumer demand, and growth in our new product sales. Our large retail customers reported year over year same store sales growth of approximately 6% during 2016. See Notes to Consolidated Financial Statements, Note C, "Business Combinations" for additional information concerning acquired businesses. Industrial: Gross sales to the industrial market increased 35% in 2017 compared to 2016, resulting from a 29% increase in overall unit sales and a 6% increase in selling prices. Businesses we acquired contributed 25% to our growth in unit sales. Our organic unit sales growth of 4% was primarily achieved through share gains including adding 390 new customers during the year and increasing the number of locations we serve of existing customers by 142 new stores. Gross sales to the industrial market increased 11% in 2016 compared to 2015, resulting from a 13% increase in overall unit sales, offset by a 2% decrease in selling prices. Businesses we acquired contributed 10% to our growth in unit sales. Our organic growth in unit sales was 3% as a result of share gains achieved by adding 191 new customers during the year and increasing the number of locations we serve certain large customers. We believe overall market demand decreased in 2016 due, in part, to the strong U.S. dollar which impacted our customers with export sales. See Notes to Consolidated Financial Statements, Note C, "Business Combinations" for additional information concerning acquired businesses. Construction: Gross sales to the construction market increased almost 16% in 2017 compared to 2016, due to a unit sales increase of 7% and a 9% increase in selling prices. Unit sales increased due to a 7% increase in units shipped to residential construction customers and a 9% increase in shipments to manufactured housing customers while unit sales to commercial construction customers remained flat. Businesses we acquired in 2017 contributed 1% to unit sales growth. 9 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comparatively, the Mortgage Bankers Association of America reported year over year national housing starts increased 4%, the commercial construction market increased 3% and the National Association of Home Builders reported industry production of HUD-code homes increased over 15%. Gross sales to the construction market increased over 12% in 2016 compared to 2015, due to a unit sales increase of 11% and a 1% increase in selling prices. Unit sales increased due to a 17% increase in units shipped to residential construction customers, a 10% increase in shipments to commercial construction customers, and a 5% increase in shipments to manufactured housing customers. Businesses we acquired in 2016 contributed 2% in unit sales growth to manufactured housing customers. Comparatively, the Mortgage Bankers Association of America reported year over year national housing starts increased 5%, the commercial construction market increased 5%, the National Association of Home Builders reported industry production of HUD-code homes increased 14%, and modular home starts decreased 1% in 2016 (the last period reported). The increases in our sales to residential and commercial construction above nationally recognized market data are primarily due to a combination of increased demand and market share in certain areas of our geographic footprint. Our growth in the manufactured housing market was less than the national average, which was primarily due to a reduction in market share resulting from the loss of certain customers. 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 products generally carry higher gross margins than our commodity-based products. 2017 2016 2015 Value-Added Commodity-Based 36.7 % 37.4 % 40.2 % 63.3 % 62.6 % 59.8 % COST OF GOODS SOLD AND GROSS PROFIT Our gross profit percentage decreased from 14.6% in 2016 to 13.8% in 2017 due, in part, to the high level of lumber prices. This is evident when comparing our increase in gross profits with our increase in units shipped. Our gross profit dollars increased by over $68 million, or 14%, which is slightly below our 15% increase in unit sales. Our profitability in 2017 was impacted by the following factors:  Approximately $8 million, a 5% increase in our gross profit in the retail market, was attributable to our growth in unit sales to that market. Businesses we acquired in 2017 contributed $1.6 million of this increase. Our increase in gross profit was less than our increase in unit sales as a result of (1) Lumber Market volatility, particularly in the second quarter which is our primary selling season, and (2) the acquisition of Robbins in the first quarter of 2017, which primarily sells lower margin treated lumber products.  Our growth in unit sales to the industrial market resulted in a $34 million, or 20%, increase in our gross profit, which was due primarily to businesses we acquired in 2017 and 2016. Our increase in gross profit was less than our increase in unit sales primarily due to the impact of higher lumber prices on our products sold with fixed selling prices.  Almost $13 million, or 9%, of our gross profit improvement was due to growth in sales to the residential construction and manufactured housing markets. Our gross profit increase exceeded our increase in unit sales 10 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS primarily due to leveraging our fixed manufacturing costs, which helped offset the impact of Lumber Market volatility and higher labor rates and benefit costs.  The remaining $13 million increase in our gross profit was due to a variety of factors including favorable labor and overhead cost variances, increases in vendor rebates, and a decrease in customer rebates compared to 2017. Our gross profit percentage increased from 13.9% in 2015 to 14.6% in 2016. Additionally, our gross profit dollars increased by over $75 million, or 19%, which exceeded our 11% increase in unit sales. The improvement in our profitability in 2016 is attributable to the following factors:  Approximately $38 million of the increase was attributable to our growth in unit sales to the retail market and an improvement in margin on those sales. New product sales, effective inventory positioning leading to lower lumber costs, and the favorable impact of selling into a rising lumber market on variable priced products contributed to our margin improvement.  Our growth in unit sales to the industrial market and margin improvement on those sales for most of the year resulted in a $22 million improvement in our gross profit. Businesses we acquired in 2016 contributed $16 million to this increase. The gross margin improvement was attributable to a favorable improvement in our product sales mix of more value-added products.  Almost $16 million of our gross profit improvement was due to growth in sales to the residential construction, commercial construction, and manufactured housing markets as our gross margins remained relatively flat. SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES Selling, general and administrative ("SG&A") expenses increased by approximately $52.1 million, or 16.7%, in 2017 compared to 2016, while we reported a 15% increase in unit sales. Acquired businesses contributed $41.0 million to our increase. The remaining increase in SG&A was primarily due to a $11.1 million increase in compensation and related costs resulting from annual raises, greater benefit costs, and hiring additional personnel to support sales growth. Our annual incentive bonus expense was almost $44 million compared to $45 million last year. This decrease, in spite of an increase in profits, was due to a decline in our return on investment, a key performance metric for determining incentive compensation bonus payments. Selling, general and administrative ("SG&A") expenses increased by approximately $45.9 million, or 17%, in 2016 compared to 2015, while we reported an 11% increase in unit sales. Acquired businesses contributed $17 million to this increase. The remaining increase in SG&A was primarily due to an $11 million increase in compensation and benefit costs resulting from annual raises, other cost increases, and hiring additional personnel to support sales growth, and a $14 million increase in incentive compensation expense tied to our return on investment. INTEREST, NET Net interest costs were higher in 2017 compared to 2016, due to a higher outstanding balance on our revolving line of credit throughout 2017 as well as an increase in the borrowing rate on our revolving credit facility which is tied to LIBOR. Net interest costs were lower in 2016 compared to 2015, due to a lower outstanding balance on our revolving line of credit throughout 2016. 11 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INCOME TAXES Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for state and local income taxes, permanent tax differences, and the impact of the Tax Act in the U.S. Our effective tax rate decreased to 29.5% in 2017 compared to 34.3% in 2016. The decrease in the 2017 tax rate is primarily due to the impact of the Tax Act, which resulted in a $6.4 million reduction in our net deferred tax liability at the end of December 2017. The remaining decrease was due to increases in tax credits and permanent tax differences. Our effective tax rate decreased to 34.3% in 2016 compared to 35.0% in 2015. The decrease in the 2016 tax rate is primarily due to a reduction in our estimated state tax rate. SEGMENT REPORTING The following tables present, for the periods indicated, our net sales and earnings from operations by reportable segment (in thousands). North South West All Other Total North South West All Other Corporate1 Total Net Sales December 26, 2015 December 30, December 31, 2017 2016 $ 1,133,656 $ 1,000,426 $ 922,092 656,550 1,133,398 175,031 $ 3,941,182 $ 3,240,493 $ 2,887,071 837,370 1,417,924 552,232 711,862 1,251,093 277,112 2017 vs 2016 2016 vs 2015 8.5 % 8.4 10.4 58.3 12.2 % 13.3 % 17.6 13.3 99.3 21.6 % Earnings from Operations December 31, December 26, December 30, 2017 2016 $ 61,326 $ 59,408 $ 2015 53,879 30,740 70,220 3,038 (22,410) $ 181,469 $ 164,438 $ 135,467 46,646 82,465 17,296 (26,264) 47,146 76,875 16,639 (35,630) 2017 vs 2016 2016 vs 2015 10.3 % 53.4 9.5 447.7 (59.0) 21.4 % 3.2 % (1.1) 7.3 3.9 26.3 10.4 1. Corporate primarily represents over (under) allocated administrative costs and certain incentive compensation expense. North Market Classification Retail Industrial Construction Total Gross Sales Sales Allowances Net Sales of North Segment by Market Twelve Months Ended December 30, December 31, December 26, % Change 2017 2016 2015 $ 488,871 $ 467,619 $ 416,635 118,315 403,183 938,133 (16,041) 157,365 510,810 1,157,046 (23,390) 115,889 436,928 1,020,436 (20,010) % Change 2017 vs 2016 2016 vs 2015 12.2 (2.1) 8.4 8.8 24.7 4.5 35.8 16.9 13.4 16.9 12 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Total Net Sales $ 1,133,656 $ 1,000,426 $ 922,092 13.3 8.5 Net sales attributable to the North reportable segment increased by $133 million, or 13.3%, in 2017, due primarily to the following factors:  Acquired operations contributed over $29 million to our growth in sales to the industrial market.  Higher lumber prices resulted in an increase in our selling prices.  Organic unit sales growth to the industrial and construction markets was offset slightly by a decrease in unit sales to the retail market due to a reduction in demand from certain customers. Earnings from operations for the North reportable segment increased in 2017 by $1.9 million, or 3.2%, due to an increase in gross profit of $9.2 million, offset by a $7.3 million increase in SG&A expenses compared to last year. Acquired operations contributed $1.5 million to our operating profits in 2017. Gross profits and SG&A were impacted by the same factors discussed under “Cost of Goods Sold and Gross Profit” and “Selling, General, and Administrative Expenses.” Net sales attributable to the North reportable segment increased by 8.5% in 2016, due to increases in sales to our retail and residential construction markets, offset by a decrease in sales to our industrial customers as a result of the same factors discussed under "Gross Sales". Earnings from operations for the North reportable segment increased in 2016 by $5.5 million, or 10.3%, due to an increase in gross profit of $13.6 million, offset by an $8.1 million increase in SG&A expenses compared to the prior year. Additionally, margin improvements were achieved on sales to the retail and industrial markets due to a more favorable product sales mix focused on value-added products. South Market Classification Retail Industrial Construction Total Gross Sales Sales Allowances Total Net Sales Net Sales of South Segment by Market Twelve Months Ended % Change 2017 vs 2016 December 30, December 31, December 26, 2015 2017 2016 $ 388,784 $ 317,242 $ 288,442 244,380 135,512 668,334 (11,784) $ 837,370 $ 711,862 $ 656,550 246,849 161,999 726,090 (14,228) 271,005 196,471 856,260 (18,890) % Change 2016 vs 2015 10.0 1.0 19.5 8.6 20.7 8.4 22.6 9.8 21.3 17.9 32.8 17.6 Net sales attributable to the South reportable segment increased by $125 million, or 17.6%, in 2017, primarily due to the following factors:  Acquired operations contributed $88.4 million, $5.0 million, and $6.1 million to our retail, industrial, and construction markets, respectively. 13 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  Higher lumber prices increased our selling prices.  Organic unit sales growth to the construction and industrial markets was offset by a decline in unit sales to the retail market as a result of transferring our import and export business to our International segment and management team. Our International segment was formed, among other reasons, to gain efficiencies by consolidating our international business into one unit. Earnings from operations for the South reportable segment decreased in 2017 by $0.5 million, or 1.1%, as the increase in gross profit of $3.9 million was more than offset by a $4.4 million increase in SG&A expenses compared to last year. Acquired operations contributed $3.5 million to our operating profits in 2017. Our decline in profitability was due to customer attrition in our East Central and Southeast regions. Net sales attributable to the South reportable segment increased by 8.4% in 2016, primarily due to an increase in sales to our retail and manufactured housing customers, as a result of the same factors discussed under "Gross Sales". Earnings from operations for the South reportable segment increased in 2016 by $16.4 million, or 53.4%, due to an increase in gross profit of $17.9 million, offset by a $1.5 million increase in SG&A expenses compared to the prior year. Additionally, we achieved margin improvements primarily due to improvements in our sales mix of more value-added products and the closure of certain under-performing operations. West Market Classification Retail Industrial Construction Total Gross Sales Sales Allowances Total Net Sales Net Sales of West Segment by Market Twelve Months Ended December 30, December 31, December 26, % Change 2017 2015 2016 $ 439,667 $ 382,117 $ 322,215 458,202 366,483 1,146,900 (13,502) $ 1,417,924 $ 1,251,093 $ 1,133,398 524,819 470,773 1,435,259 (17,335) 466,209 419,205 1,267,531 (16,438) % Change 2017 vs 2016 2016 vs 2015 18.6 1.7 14.4 10.5 21.7 10.4 15.1 12.6 12.3 13.2 5.5 13.3 Net sales of the West reportable segment increased by $167 million, or 13.3%, in 2017, primarily due to the following factors:  Acquired operations contributed $4.9 million, $3.2 million, and $6.8 million to our retail, industrial, and construction markets, respectively.  Higher lumber prices increased our selling prices.  Organic unit sales growth in each of our markets due to the factors discussed under “Gross Sales”. Earnings from operations for the West reportable segment increased in 2017 by $5.6 million, or 7.3%, due to an increase in gross profit of $12.1 million, offset by a $6.5 million increase in SG&A expenses compared to last year due to the same factors discussed under “Cost of Goods Sold and Gross Profit” and “Selling, General, and Administrative Expenses.” 14 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales of the West reportable segment increased by 10.4% in 2016, primarily due to an increase in sales to the retail and construction markets, as a result of the same factors discussed under "Gross Sales". Additionally, newly acquired businesses contributed $11.3 million in gross sales to the retail and construction markets in 2016. Earnings from operations for the West reportable segment increased in 2016 by $6.7 million, or 9.5%, due to an increase in gross profit of $15.1 million, offset by a $8.4 million increase in SG&A expenses compared to the prior year. Our margins increased due to an improvement in our sales mix of value-added products. All Other Market Classification Retail Industrial Construction Total Gross Sales Sales Allowances Total Net Sales Net Sales of All Other Segment by Market Twelve Months Ended 2015 2017 December 30, December 31, December 26, % Change % Change 2017 vs 2016 2016 vs 2015 15.9 125.2 (75.0) 58.2 52.1 58.3 2016 $ 176,043 $ 127,294 $ 109,818 69,282 12 179,112 (4,081) $ 552,232 $ 277,112 $ 175,031 38.3 144.1 9,533.3 96.7 (19.6) 99.3 380,892 289 557,224 (4,992) 156,022 3 283,319 (6,207) Note that prior years have been restated to reflect the reclassification of captive insurance external revenue from the sales allowances line item into the industrial market. We believe these amounts to be immaterial to the financial statements. Our All Other reportable segment consists of our Alternative Materials, International, idX, and certain other segments which are not significant. Net sales of all other segments increased $275.1 million, or 99.3%, in 2017 primarily due to:  Acquired operations, including idX, contributed $196 million to our sales growth to the industrial market. Additionally, the Mexico reporting unit of our international segment increased its sales to the industrial market.  Our increase in sales to the retail market was due to the transfer of our import and export business into our international segment. Earnings from operations for the All Other reportable segment increased in 2017 by $0.7 million, or 3.9%, due to an increase in gross profit of $46.5 million, offset by a $45.8 million increase in SG&A expenses compared to last year. Acquired operations increased earnings from operations by $1.7 million in 2017. Net sales of all other segments increased $102.1 million, or 58.3%, in 2016 primarily due to:  The idX acquisition on September 16, 2016, which contributed $87.0 million in sales to the industrial market.  An increase in sales by our Alternative Materials operations, primarily due to an increase in market share with certain Big Box retailers. Earnings from operations for the All Other reportable segment increased in 2016 by $13.6 million, or 448%, due to an increase in gross profit of $23.9 million, offset by a $10.3 million increase in SG&A expenses compared to the prior 15   UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS year. The increase was primarily due to the idX acquisition’s contribution during the fourth quarter of 2016 and sales growth and operational improvements of our Alternative Materials operations and to a lesser extent the performance of our captive insurance subsidiary, Ardellis. OFF-BALANCE SHEET COMMITMENTS AND CONTRACTUAL OBLIGATIONS We have no significant off-balance sheet commitments other than operating leases. The following table summarizes our contractual obligations as of December 30, 2017 (in thousands). Contractual Obligation Long-term debt and capital lease obligations Estimated interest on long-term debt and capital lease obligations Operating leases Capital project purchase obligations Total Less than 1 Year Payments Due by Period 3 – 5 Years $ 1,290 $ 62,575 $ 38,878 $ 43,260 $ 146,003 1 – 3 Years After 5 Years Total 5,239 19,405 7,743 22,967 73,924 7,743 $ 33,677 $ 93,890 $ 58,777 $ 64,293 $ 250,637 6,174 13,725 — 3,393 17,640 — 8,161 23,154 — As of December 30, 2017, we also had $26.5 million in outstanding letters of credit issued during the normal course of business, as required by some vendor contracts. The table below presents, for the periods indicated, a summary of our cash flow statement (in thousands): LIQUIDITY AND CAPITAL RESOURCES December 30, December 31, December 26, Cash from operating activities Cash used in investing activities Cash from (used in) financing activities Effect of exchange rate changes on cash Net change in cash and cash equivalents Cash, cash equivalents, and restricted cash, beginning of year Cash, cash equivalents, and restricted cash, end of year 2017 2016 136,583 172,520 (137,659) (227,657) 3,211 (1,927) (53,853) 88,342 2015 168,796 (46,636) (33,002) (1,221) 87,937 405 $ 28,816 $ 34,489 $ 88,342 (5,247) 650 (5,673) 34,489 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 issuance 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 earnings before interest, taxes, depreciation and amortization. We believe these financial ratios are among many other 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 due to our primary selling season which occurs during the period from March to August. Consequently, our working capital increases during our first and second quarter resulting in negative or modest cash flows from operations during those periods. Conversely, we experience a substantial decrease in working capital once we move beyond our peak selling season which typically results in significant cash flows from operations in our third and fourth quarters. 16 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Due to the seasonality of our business and the effects of the Lumber Market, we believe our cash cycle (days of sales outstanding plus days supply of inventory less days payables outstanding) is a good indicator of our working capital management. As indicated in the table below, our cash cycle increased to 52 days in 2017 from 48 days in 2016. Days of sales outstanding Days supply of inventory Days payables outstanding Days in cash cycle Twelve Months Ended December 30, December 31, December 26, 2017 2016 2015 31 41 (20) 52 31 38 (21) 48 31 43 (21) 53 The increase in our days’ supply of inventory was due to idX as its business requires a higher investment in inventory due to the long project lead time of its customers. Our cash flows from operating activities in 2017 was $136.6 million, which was comprised of net earnings of $124.0 million and $47.7 million of non-cash expenses, offset by a $35.1 million increase in working capital since the end of December 2016. Comparatively, cash generated from operating activities was approximately $172.5 million in 2016, which was comprised of net earnings of $105.5 million, $48.2 million of non-cash expenses, and an $18.8 million decrease in working capital since the end of 2015. Our cash used in investing activities during 2017 was $137.7 million, which was comprised primarily of purchases of property, plant, and equipment totaling $71.1 million and business acquisitions totaling $60.6 million. The increase in our capital expenditures in 2017 is primarily due to the additional requirements of our recently acquired operations and an increase in our “expansionary and efficiency” capital expenditures tied to initiatives including new products, value- added product capacity expansion, and automation. Outstanding purchase commitments on existing capital projects totaled approximately $7.7 million on December 30, 2017. The sale and purchase of investments totaling $5.1 million and $13.5 million, respectively, are due to investment activity in our captive insurance subsidiary. In 2016, investments in business acquisitions comprised most of our cash used in investing activities and totaled $172.9 million (which includes $92.8 million paid to retire all of idX's debt and certain other obligations on the acquisition date). Purchases of property, plant, and equipment totaled $53.8 million. Outstanding purchase commitments on existing capital projects totaled approximately $10.1 million on December 31, 2016. Cash flows from financing activities primarily consisted of net borrowings under our revolving credit facility of approximately $35.6 million, offset by $19.6 million in dividend payments. We paid a dividend in June at $0.15 per share and December at $0.17 per share after considering the impact of our 3 for 1 stock split on November 14, 2017. Additionally, we had approximately $13.0 million in stock repurchases. Comparatively in 2016, cash flows from financing activities primarily consisted of net borrowings under our revolving credit facility of approximately $23.7 million, offset by $17.7 million in dividend payments. On December 30, 2017, we had $59.4 million outstanding on our $295 million revolving credit facility. The revolving credit facility also supports letters of credit totaling approximately $9.8 million on December 30, 2017. As a result, we have approximately $226 million in remaining availability on our revolver. Additionally, we have $150 million in availability under a "shelf agreement" for long term debt with a current lender. Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest 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 in compliance with all our covenant requirements on December 30, 2017. 17 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS See Notes to Consolidated Financial Statements, Note M, “Commitments, Contingencies, and Guarantees”. CRITICAL ACCOUNTING POLICIES In preparing our consolidated financial statements, we follow accounting principles generally accepted in the United States. These principles require us to make certain estimates and apply judgments that affect our financial position and results of operations. We continually review our accounting policies and financial information disclosures. Following is a summary of our more significant accounting policies that require the use of estimates and judgments in preparing the financial statements. ACCOUNTS RECEIVABLE ALLOWANCES We record provisions against gross revenues for estimated returns and cash discounts in the period when the related revenue is recorded. These estimates are based on factors that include, but are not limited to, historical discounts taken, analysis of credit memorandums 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. 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. As a result of favorable factors in each of these areas combined with substantial excess equity value over carrying value from the prior year analysis, management has determined that the carryforward method is appropriate to use with the exception of the idX and Australian reporting units where a more in-depth analysis was completed. The discounted cash flow analysis, from prior years, uses the following assumption: a business is worth today what it can generate in future cash flows; cash received today is worth more than an equal amount of cash received in the future; and future cash flows can be reasonably estimated. The discounted cash flow analysis is based on the present value of projected cash flows and residual values. As our annual testing date of October 1, 2017, based on the carryforward method and the analysis, the fair values would exceed the carrying values for each of the Company’s reporting units. If the carrying value of a long-lived asset is considered impaired, a level two analysis will be conducted and an impairment charge is recorded to adjust the asset to its fair value. Changes in forecasted operations and changes in discount rates can materially affect these estimates. In addition, we test goodwill annually for impairment or more frequently if changes in circumstances or the occurrence of other events suggest impairments exist. The test for impairment requires us to make several estimates about fair value, most of which are based on projected future cash flows and market valuation multiples. Changes in these estimates may result in the recognition of an impairment loss. INSURANCE RESERVES We are primarily self-insured for certain employee health benefits, and have self-funded retentions for general liability, automobile liability, property and workers’ compensation. We are fully self-insured for environmental liabilities. The general liability, automobile liability, property, workers’ compensation, and certain environmental liabilities are managed through a wholly-owned insurance company; the related assets and liabilities of which are included in the 18 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS consolidated financial statements as of December 30, 2017. 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 up to our pre-determined stop loss limits. These reserves, including incurred but not reported claims, are based on internal computations. These computations consider our historical claims experience, independent statistics, and trends.  The environmental reserve is based on known remediation activities at certain wood preservation facilities and the potential for undetected environmental matters at other sites. The reserve for known activities is based on expected future costs and is computed by in-house experts responsible for managing our monitoring and remediation activities. In addition to providing coverage for the Company, our wholly-owned insurance company provides Excess Loss Insurance (primarily medical and prescription drug) to certain third parties. As of December 30, 2017, there were 30 such contracts in place. Reserves associated with these contracts were $3.4 million at December 30, 2017 and $2.5 million at December 31, 2016, and are accrued based on third party actuarial valuations of the expected future liabilities. On April 14, 2017 the U.S. Branch of Ardellis Insurance Ltd. was granted its Certificate of Authority to transact property and casualty insurance lines as an admitted carrier in the State of Michigan. 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 income 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 income tax assets and liabilities. Tax laws are complex and subject to different interpretations by taxpayers and respective government taxing authorities, which results in judgment in determining our tax expense and in evaluating our tax positions. Our tax positions are reviewed quarterly and adjusted as new information becomes available. REVENUE RECOGNITION Revenue for product sales 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. Performance on construction contracts is reflected in operations using percentage-of-completion accounting, under either the cost to cost or units of delivery methods, depending on the nature of the business at individual operations. Under percentage-of-completion using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under percentage-of- completion using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units per the contract. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions 19 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent. Our construction contracts are generally entered into with a fixed price and completion of the projects can range from 6 to 18 months in duration. Therefore, our operating results are impacted by, among many other things, labor rates and commodity costs. During the year, we update our estimated costs to complete our projects using current labor and commodity costs and recognize losses to the extent that they exist. GOALS FORWARD OUTLOOK The Company’s goal is to achieve long-term sales growth that exceeds positive U.S. GDP growth by 4 percent to 6 percent. Our general long-term objectives also include:  Achieving sales growth primarily through new product introduction, international business expansion, and gaining additional market share, particularly in our core retail, industrial and commercial construction markets;   Identifying new growth opportunities in businesses with adjacencies to our core businesses, primarily through strategic business acquisitions; Increasing our profitability through cost reductions, productivity improvements as volume improves, and a more favorable mix of value-added products; and  Earning a return on invested capital in excess of our weighted average cost of capital. RETAIL MARKET The Home Improvement Research Institute (“HIRI”) anticipates growth in home improvement spending and has forecasted a 3.7% compounded annual growth rate through 2020. We continue to compete for market share for certain retail customers and face intense pricing pressure from other suppliers to this market. Our long-term goal is to achieve sales growth by:  Increasing our market share of value-added and preservative-treated products, particularly with independent retail customers.  Developing new, value-added products, such as our Eovations product line.  Adding new products and customers through strategic business acquisitions or alliances.  Increasing our emphasis on product innovation and product differentiation in order to counter commoditization trends and influences. 20 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INDUSTRIAL MARKET Our goal is to increase our sales of wood and alternative packaging products to a wide variety of industrial and OEM 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 growth opportunities as a result of our competitive advantages in manufacturing, purchasing, and material utilization. We plan to continue to obtain market share by expanding our manufacturing capacity capabilities and product offerings and increasing the size of our dedicated industrial design and sales personnel. We also plan to pursue strategic acquisition opportunities. On September 16, 2016, we acquired idX. See Footnote C "Business Combinations" in the Notes to Consolidated Financial Statements. We plan to pursue opportunities to grow this business in the future including strategic acquisition opportunities. CONSTRUCTION MARKET The National Association of Home Builders forecasts a 2% increase in manufactured home shipments in 2018 followed by a 6% increase in 2019. We currently supply approximately 40% of the trusses used in manufactured housing and we will strive to maintain our market share of trusses produced for this market. The Mortgage Bankers Association of America forecasts a 7% increase in national housing starts to an estimated 1.4 million starts in 2018. The National Association of Home Builders forecasts starts of 1.2 million, a 3% increase from 2017. We believe we are well-positioned to capture our share of any increase that may occur in housing starts in the regions we operate. However, due to our conservative approach to adding capacity to serve this market and focus on managing potential channel conflicts with certain customers, our growth may trail the market in future years. GROSS PROFIT We believe the following factors may impact our gross profits and margins in the future:  End market demand.  Our ability to maintain market share and gross margins on products sold to our largest customers. We believe our level of service, geographic diversity, and quality of products provides an added value to our customers. However, if our customers are unwilling to pay for these advantages, our sales and gross margins may be reduced. Excess capacity exists for suppliers in certain of our markets. As a result, we may experience pricing pressure in the future.  Sales mix of value-added and commodity products.  Fluctuations in the relative level of the Lumber Market and the trend in the market place of lumber. (See "Impact of the Lumber Market on our Operating Results.")  Fuel and transportation costs.  Rising labor and benefit costs.  Our ability to continue to achieve productivity improvements as our unit sales increase and planned cost reductions through our continuous improvement, automation, and other initiatives. 21 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES In recent years, selling, general and administrative (SG&A) expenses have increased as we have added personnel needed to take advantage of growth opportunities and execute our initiatives designed to increase our sales of new products and improve our sales mix of value-added products. We anticipate our trend of increases in these costs will continue in 2018; however, our objective to reduce these costs as a percentage of sales (assuming lumber prices remain stable) as we grow as a result of fixed costs and through the improved productivity of our people. In addition, bonus and other incentive expenses for all salaried and sales employees is based on our profitability and the effective management of our assets and will continue to fluctuate based on our results. On a long-term basis, we expect that our SG&A expenses will primarily be impacted by:  Our growth in sales to the industrial market and the construction market. Our sales to these markets require a higher ratio of SG&A costs due, in part, to product design and engineering requirements.  Sales of new products which generally require higher development, marketing, advertising, and other selling costs.  Our incentive compensation programs which is tied to gross profits, pre-bonus earnings from operations and return on investment.  Our growth and success in achieving continuous improvement objectives designed to improve our productivity and leveraging our fixed costs. INCOME TAXES We anticipate an additional 4.5% in our overall effective tax rate in 2018 from 2017 to approximately 25%, which is driven primarily by a reduction in the U.S. corporate federal tax rate from 35% to 21% as a result of the Tax Act. LIQUIDITY AND CAPITAL RESOURCES Our cash cycle will continue to be impacted in the future by our mix of sales by market. Sales to the residential and commercial construction and industrial markets require a greater investment in working capital (inventory and accounts receivable) than our sales to the retail and manufactured housing markets. Additionally, our investment in trade receivables and inventory will continue to be impacted by the level of lumber prices. In January 2018, we sold real estate in Medley, Florida, and received $36 million of pretax proceeds and recognized a $7 million pretax gain. We are currently evaluating purchases of other real estate, including replacement capacity of our Medley plant, which will qualify as a like-kind exchange for U.S. tax purposes and allow us to defer the $25 million tax gain from the sale. Additionally, management expects to spend approximately $85 million on capital expenditures, incur depreciation of approximately $50 million, and incur amortization and other non-cash expenses of approximately $8 million in 2018. On December 30, 2017, we had outstanding purchase commitments on capital projects of approximately $8 million. We intend to fund capital expenditures and purchase commitments through our operating cash flows and availability under our revolving credit facility which is considered sufficient to meet these commitments and working capital needs. 22 UNIVERSAL FOREST PRODUCTS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We have no present plan to change our dividend policy, which was recently increased by 13% to a semi-annual rate of $0.17 per share. Our dividend rates are reviewed and approved at our April and October board meetings and payments are made in June and December of each year. We have a share repurchase program approved by our Board of Directors, and as of December 30, 2017, we have authorization to buy back approximately 2.7 million shares. In the past, we have repurchased shares in order to offset the effect of issuances resulting from our employee benefit plans and at opportune times when our stock price falls to predetermined levels. 23 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 30, 2017, based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”). Based on that evaluation, management has concluded that as of December 30, 2017, our internal control over financial reporting was effective. The effectiveness of the Company’s internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which follows our report. Universal Forest Products, Inc. February 28, 2018 24 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Universal Forest Products, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Universal Forest Products, Inc. and subsidiaries (the “Company”) as of December 30, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 30, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 30, 2017, of the Company and our report dated February 28, 2018, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting 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. /s/ Deloitte & Touche LLP Grand Rapids, Michigan February 28, 2018 25 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Universal Forest Products, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Universal Forest Products, Inc. and subsidiaries (the "Company") as of December 30, 2017 and December 31, 2016, the related consolidated statements of earnings and comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December 30, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2017 and December 31, 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2017, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 30, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2018, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Grand Rapids, Michigan February 28, 2018 We have served as the Company's auditor since 2014. 26 UNIVERSAL FOREST PRODUCTS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) ASSETS CURRENT ASSETS: Cash and cash equivalents Investments Restricted cash Accounts receivable, net Inventories: Raw materials Finished goods Total inventories Refundable income taxes Other current assets TOTAL CURRENT ASSETS DEFERRED INCOME TAXES RESTRICTED INVESTMENTS OTHER ASSETS GOODWILL INDEFINITE-LIVED INTANGIBLE ASSETS OTHER INTANGIBLE ASSETS, NET PROPERTY, PLANT AND EQUIPMENT: Land and improvements Building and improvements Machinery and equipment Furniture and fixtures Construction in progress PROPERTY, PLANT AND EQUIPMENT,GROSS Less accumulated depreciation and amortization PROPERTY, PLANT AND EQUIPMENT, NET TOTAL ASSETS LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Cash overdraft Accounts payable Accrued liabilities: Compensation and benefits Other Current portion of long-term debt TOTAL CURRENT LIABILITIES LONG-TERM DEBT DEFERRED INCOME TAXES OTHER LIABILITIES TOTAL LIABILITIES SHAREHOLDERS’ EQUITY: Controlling interest shareholders’ equity: Preferred stock, no par value; shares authorized 1,000,000; issued and outstanding, none Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding, 61,191,888 and 61,026,207 Additional paid-in capital Retained earnings Accumulated other comprehensive income Total controlling interest shareholders’ equity Noncontrolling interest TOTAL SHAREHOLDERS’ EQUITY December 30, 2017 December 31, 2016 $ 28,339 $ 11,269 477 327,751 234,354 225,954 460,308 7,228 28,115 863,487 1,865 8,359 7,368 212,644 7,415 34,910 134,916 213,384 372,628 25,251 16,922 763,101 (434,472) 328,629 1,464,677 $ 25,851 $ 140,106 97,556 38,404 1,329 303,246 144,674 14,079 28,655 490,654 $ $ 34,091 10,348 398 282,253 198,954 198,273 397,227 11,459 20,662 756,438 1,546 — 8,617 198,535 2,340 26,731 124,316 204,586 332,397 22,570 15,593 699,462 (401,611) 297,851 1,292,058 19,761 124,660 92,441 32,281 2,634 271,777 109,059 20,817 29,939 431,592 $ — $ — 61,192 161,928 736,212 144 959,476 14,547 974,023 1,464,677 $ 61,026 144,649 649,135 (5,630) 849,180 11,286 860,466 1,292,058 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ See notes to consolidated financial statements. 27 UNIVERSAL FOREST PRODUCTS, INC. CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (in thousands, except per share data) NET SALES COST OF GOODS SOLD GROSS PROFIT SELLING, GENERAL AND ADMINISTRATIVE EXPENSES NET (GAIN) LOSS ON DISPOSITION OF ASSETS EARNINGS FROM OPERATIONS INTEREST EXPENSE INTEREST INCOME EQUITY IN EARNINGS OF INVESTEE EARNINGS BEFORE INCOME TAXES INCOME TAXES NET EARNINGS LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST EARNINGS PER SHARE - BASIC EARNINGS PER SHARE - DILUTED December 30, 2017 Year Ended December 31, 2016 December 26, 2015 $ 3,941,182 $ 3,240,493 $ 2,887,071 2,487,167 399,904 264,265 172 135,467 5,133 (294) (374) 4,465 131,002 45,870 85,132 3,398,356 2,765,903 474,590 310,152 — 164,438 4,575 (541) (267) 3,767 160,671 55,174 105,497 542,826 362,220 (863) 181,469 6,218 (731) (25) 5,462 176,007 51,967 124,040 (4,528) 119,512 $ (4,318) 101,179 $ (4,537) 80,595 1.95 $ 1.94 $ 1.66 $ 1.65 $ 1.33 1.33 $ $ $ OTHER COMPREHENSIVE INCOME: OTHER COMPREHENSIVE GAIN (LOSS) COMPREHENSIVE INCOME LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST 6,130 130,170 (2,703) 102,794 (7,257) 77,875 (4,884) (2,660) (3,213) $ 125,286 $ 100,134 $ 74,662 See notes to consolidated financial statements. 28 UNIVERSAL FOREST PRODUCTS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in thousands, except share and per share data) Balance at December 27, 2014 Net earnings Foreign currency translation adjustment Unrealized gain (loss) on investment Noncontrolling interest associated with business acquisitions Distributions to noncontrolling interest Purchases of noncontrolling interest Cash dividends - $0.133 & $0.140 per share - semiannually Issuance of 90,639 shares under employee stock plans Issuance of 226,812 shares under stock grant programs Issuance of 195,162 shares under deferred compensation plans Repurchase of 40,839 shares Tax benefits from non-qualified stock options exercised Expense associated with share-based compensation arrangements Accrued expense under deferred compensation plans Payments received on employee stock notes receivable Balance at December 26, 2015 Net earnings Foreign currency translation adjustment Unrealized gain (loss) on investment Noncontrolling interest associated with business acquisitions Distributions to noncontrolling interest Net purchase and dissolution of noncontrolling interest Cash dividends - $0.140 & $0.150 per share - semiannually Issuance of 20,439 shares under employee stock plans Issuance of 407,271 shares under stock grant programs Issuance of 173,370 shares under deferred compensation plans Expense associated with share-based compensation arrangements Accrued expense under deferred compensation plans Balance at December 31, 2016 Net earnings Foreign currency translation adjustment Unrealized gain (loss) on investment & foreign currency Distributions to noncontrolling interest Additional purchases of noncontrolling interest Net purchase and dissolution of noncontrolling interest Cash dividends - $0.150 & $0.170 per share - semiannually Issuance of 23,691 shares under employee stock plans Issuance of 428,622 shares under stock grant programs Issuance of 159,108 shares under deferred compensation plans Repurchase of 445,740 shares Expense associated with share-based compensation arrangements Accrued expense under deferred compensation plans Balance at December 30, 2017 $ $ $ Controlling Interest Shareholders’ Equity Accumulated Other Employees Common Stock 59,952 $ 122,515 $ 502,334 $ Retained Earnings $ Additional Paid-In Capital Comprehensive Stock Notes Noncontrolling Earnings Receivable Interest Total 1,348 $ (455) $ 80,595 (5,892) (41) (16,507) 13,866 $ 4,537 (1,324) 1,019 (3,188) (1,256) — 91 227 195 (40) 984 1,685 (195) 26 370 1,846 4,048 (786) 304 60,425 $ 131,279 $ 565,636 $ (4,585) $ 101,179 151 — $ (1,316) 271 13,654 $ 4,318 (1,658) — (3,280) (1,748) (17,680) 856 515 4,890 (173) 21 407 173 2,208 5,074 61,026 $ 144,649 $ 649,135 $ 119,512 24 429 159 (446) (19,607) 637 5,769 (159) 297 (12,828) 3,618 7,117 61,192 $ 161,928 $ 736,212 $ (5,630) $ — $ 5,070 704 11,286 $ 4,528 356 (4,032) 2,409 — 144 $ — $ 14,547 $ 699,560 85,132 (7,216) (41) 1,019 (3,188) (1,256) (16,507) 1,075 1,912 — (496) 370 1,846 4,048 151 766,409 105,497 (2,974) 271 — (3,280) (892) (17,680) 536 5,297 — 2,208 5,074 860,466 124,040 5,426 704 (4,032) 2,409 — (19,607) 661 6,198 — (12,977) 3,618 7,117 974,023 See notes to consolidated financial statements 29 UNIVERSAL FOREST PRODUCTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS December 30, 2017 Year Ended December 31, 2016 December 26, 2015 $ 124,040 $ 105,497 $ 85,132 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings Adjustments to reconcile net earnings to net cash from operating activities: Depreciation Amortization of intangibles Expense associated with share-based and grant compensation arrangements Expense tax benefits from share-based compensation arrangements Deferred income taxes (credits) Equity in earnings of investee Net (gain) loss on disposition of assets Changes in: Accounts receivable Inventories Accounts payable and cash overdraft Accrued liabilities and other NET CASH FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Acquisitions, net of cash received Repayments of debt of acquiree Purchase and dissolution of remaining noncontrolling interest in subsidiary Advances of notes receivable Collections on notes receivable Purchases of investments Proceeds from sale of investments Other NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving credit facilities Repayments under revolving credit facilities Borrowings of debt Repayment of debt Proceeds from issuance of common stock Dividends paid to shareholders Distributions to noncontrolling interest Repurchase of common stock Other NET CASH FROM (USED IN) FINANCING ACTIVITIES Effect of exchange rate changes on cash NET CHANGE IN CASH AND CASH EQUIVALENTS CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: Cash and cash equivalents, beginning of period Restricted cash, beginning of period Cash, cash equivalents, and restricted cash, beginning of period Cash and cash equivalents, end of period Restricted cash, end of period Cash, cash equivalents, and restricted cash, end of period SUPPLEMENTAL INFORMATION: Interest paid Income taxes paid NON-CASH INVESTING ACTIVITIES Notes receivable exchanged for property NON-CASH FINANCING ACTIVITIES: Common stock issued under deferred compensation plans Property exchanged for notes receivable Acquisition earnout and noncompete adjustment prior to final purchase accounting See notes to consolidated financial statements $ $ $ $ $ $ $ 30 48,536 4,860 3,805 — (8,629) (25) (863) (30,787) (49,262) 21,159 23,749 136,583 (71,116) 2,919 (60,587) — — (234) 1,509 (13,518) 5,103 (1,735) (137,659) 758,287 (722,725) 8,525 (13,347) 660 (19,607) (4,032) (12,977) (31) (5,247) 650 (5,673) 34,489 28,816 34,091 398 34,489 28,339 477 28,816 6,020 56,663 — 5,116 — — $ $ $ $ $ $ $ 40,823 2,795 2,335 — 2,464 (267) — (5,119) (3,245) 11,259 15,978 172,520 (53,762) 3,126 (80,077) (92,830) (892) (6,012) 7,899 (5,666) 2,568 (2,011) (227,657) 131,002 (107,294) — — 536 (17,680) (3,280) — (73) 3,211 (1,927) (53,853) 88,342 34,489 87,756 586 88,342 34,091 398 34,489 4,550 57,311 — 4,353 — — $ $ $ $ $ $ $ 37,710 3,531 1,955 (33) (1,369) (374) 172 (26,007) 34,139 4,798 29,142 168,796 (43,522) 2,843 (2,505) — (1,256) (6,994) 11,446 (7,858) 1,115 95 (46,636) 297,711 (311,271) — — 1,074 (16,507) (3,188) (800) (21) (33,002) (1,221) 87,937 405 88,342 - 405 405 87,756 586 88,342 5,118 42,767 389 3,461 300 14,195 UNIVERSAL FOREST PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OPERATIONS We design, manufacture and market wood and wood-alternative products for large home centers and other retailers; structural lumber, engineered wood components, framing services, and other products for the construction market; specialty wood packaging, components, packing materials, and other wood-based products for various industries; and design, manufacture, and install customized interior fixtures used in retail and commercial structures for various markets. 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 any entity which we own 50% or more and exercise control. Intercompany transactions and balances have been eliminated. NONCONTROLLING INTEREST IN SUBSIDIARIES Noncontrolling interest in results of operations of consolidated subsidiaries represents the noncontrolling shareholders’ share of the income or loss of various consolidated subsidiaries. The noncontrolling interest reflects the original investment by these noncontrolling 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 2017, 2016, and 2015 relate to the fiscal years ended December 30, 2017, December 31, 2016, and December 26, 2015, respectively. Fiscal year 2016 was comprised of 53 weeks, which contributed an additional $60 million in sales in 2016 compared to fiscal years 2017 and 2015, which were comprised of 52 weeks. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS We follow ASC Topic 820, Fair Value Measurements and Disclosures, which provides a consistent definition of fair value, focuses on exit price, prioritizes the use of market-based inputs over entity-specific inputs for measuring fair value and establishes a three-tier hierarchy for fair value measurements. This topic requires fair value measurements to be classified and disclosed in one of the following three categories:  Level 1 — Financial instruments with unadjusted, quoted prices listed on active market exchanges.  Level 2 — Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financial instruments. Financial instrument values are determined using prices for recently traded financial instruments with similar underlying terms and direct or indirect observational inputs, such as interest rates and yield curves at commonly quoted intervals.  Level 3 — Financial instruments not actively traded on a market exchange and there is little, if any, market activity. Values are determined using significant unobservable inputs or valuation techniques. 31 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. Restricted cash consists of amounts required to be held for loss funding totaling $0.5 million and $0.4 million as of December 30, 2017 and December 31, 2016, respectively. In November 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-18, “Statement of Cash Flows (Topic 230)” (ASU 2016-18). Under ASU 2016-18, an entity will be required to explain changes in the statement of cash flows during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this update should be applied using retrospective transition method to each period presented. Companies are required to adopt the new standard for fiscal years beginning after December 15, 2017. Early adoption of ASU 2016-18 is permitted, including adoption in an interim period. The Company has early adopted this standard during the first quarter of 2017. INVESTMENTS Investments are deemed to be "available for sale" and are, accordingly, carried at fair value being the quoted market value. Unrealized investment gains or losses, net of deferred taxes, are reported as a separate component of comprehensive income or loss until sold. ACCOUNTS RECEIVABLE AND ALLOWANCES 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, in most instances, as an incentive for early payment. We base our allowances related to receivables on historical credit and collections experience, and the specific identification of other potential problems, including the general 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 uncollectible are charged to the allowance. The following table presents the activity in our accounts receivable allowances (in thousands): Additions Charged to Beginning Costs and Ending Balance Expenses Deductions* Balance Year Ended December 30,2017: Allowance for possible losses on accounts receivable $ 2,845 $ 28,102 $ (28,523) $ 2,424 Year Ended December 31, 2016: Allowance for possible losses on accounts receivable $ 2,672 $ 28,405 $ (28,232) $ 2,845 Year Ended December 26, 2015: Allowance for possible losses on accounts receivable $ 2,390 $ 20,538 $ (20,256) $ 2,672 * Includes accounts charged off, discounts given to customers and actual customer returns and allowances. We record estimated sales returns, discounts, and other applicable adjustments as a reduction of net sales in the same period revenue is recognized. 32 Accounts receivable retainage amounts related to long term construction contracts totaled $4.8 million and $6.0 million as of December 30, 2017 and December 31, 2016, respectively. All amounts are expected to be collected within 18 months. Concentration of accounts receivable related to our largest customer totaled $55.9 million and $34.0 million as of December 30, 2017 and December 31, 2016, respectively. INVENTORIES Inventories are stated at the lower of cost or market. The cost of inventories includes raw materials, direct labor, and manufacturing overhead. Cost is determined on a weighted average 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. We have inventory on consignment at customer locations valued at $14.8 million as of December 30, 2017 and $12.2 million as of December 31, 2016. 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: Land improvements Buildings and improvements Machinery, equipment and office furniture LONG-LIVED ASSETS 5 to 15 years 10 to 32 years 2 to 8 years In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), when an indicator of potential impairment exists, 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. LEASES In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-02, “Leases (Topic 842)” (ASU 2016-02). Under ASU 2016-02, an entity will be required to recognize assets and liabilities for the rights and obligations created by leases on the entity’s balance sheet for both finance and operating leases. For leases with a term of 12 months or less, an entity can elect to not recognize lease assets and lease liabilities and expense the lease over a straight-line basis for the term of the lease. ASU 2016-02 will require new disclosures that depict the amount, timing, and uncertainty of cash flows pertaining to an entity’s leases. Companies are required to adopt the new standard for annual and interim periods beginning after December 15, 2018. Early adoption of ASU 2016-02 is permitted. The FASB has tentatively decided to amend certain aspects of its new leasing standard in an attempt to provide a relief from implementation costs. Specifically, entities may elect not to restate their comparative periods in the period of adoption when transitioning to the new standard. The Company plans to continue to evaluate the effect of the new leasing guidance in 2018; therefore, the quantitative impact has not yet been determined however the Company anticipates only a balance sheet impact. GOODWILL Our annual testing date for evaluating goodwill and indefinite-lived intangible asset impairment is the first day of the Company’s fourth fiscal quarter for all reporting units. Additionally, the Company reviews various triggering events throughout the year to ensure that a mid-year impairment analysis is not required. 33 FOREIGN CURRENCY 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. Gains and losses arising from re-measuring foreign currency transactions are included in earnings. INSURANCE RESERVES Our wholly-owned insurance company, Ardellis Insurance Ltd.(“Ardellis”), was incorporated on April 21, 2001 under the laws of Bermuda and is licensed as a Class 3A insurer under the Insurance Act 1978 of Bermuda. On April 14, 2017 the U.S. Branch of Ardellis Insurance Ltd. was granted its Certificate of Authority to transact property and casualty insurance lines as an admitted carrier in the State of Michigan. We are primarily self-insured for certain employee health benefits, and have self-funded retentions for general liability, automobile liability, property and workers’ compensation. We are fully self-insured for environmental liabilities. The general liability, automobile liability, property, workers’ compensation, and certain environmental liabilities are managed through Ardellis; the related assets and liabilities of which are included in the consolidated financial statements as of December 30, 2017 and December 31, 2016. 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. In addition to providing coverage for the Company, Ardellis provides Excess Loss Insurance (primarily medical and prescription drug) to certain third parties. As of December 30, 2017, Ardellis had 30 such contracts in place. Reserves associated with these contracts were $3.4 million at December 30, 2017 and $2.5 million at December 31, 2016, and are accrued based on third party actuarial valuations of the expected future liabilities. 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 income 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 income tax assets and liabilities. REVENUE RECOGNITION On May 28, 2014, the FASB issued ASU No. 2014-09 (Accounting Standard Codification 606), Revenue from Contracts with Customers, which will replace most existing revenue recognition guidance in U.S. GAAP. The core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The Company is currently finalizing its evaluation of the impact of adopting this new guidance, which is not expected to materially impact the Company's financial condition or results of operations. The five-step model has been applied to existing contracts with customers, and based upon this review, the Company does not expect the adoption of ASU 2014-09 to have a material quantitative impact on its consolidated financial statements, as the timing of revenue recognition for product sales will continue to occur at the point of shipment. Other types of revenue, such as installation and framing, which are immaterial to our total revenue, will continue to be recognized over the appropriate period of time. As required by the standard, the Company expects to make additional disclosures related to the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company will adopt this standard in the first quarter of fiscal year 2018 using the modified retrospective. 34 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 using percentage-of-completion accounting, under either the cost to cost or units of delivery methods, depending on the nature of the business at individual operations. Under percentage-of-completion using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under percentage-of- completion using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent. Our construction contracts are generally entered into with a fixed price and completion of the projects can range from 6 to 18 months in duration. Therefore, our operating results are impacted by, among many other things, labor rates and commodity costs. During the year, we update our estimated costs to complete our projects using current labor and commodity costs and recognized losses to the extent that they exist. The following table presents the balances of percentage-of-completion accounts on December 30, 2017 and December 31, 2016 which are included in other current assets and other accrued liabilities, respectively (in thousands): Cost and Earnings in Excess of Billings Billings in Excess of Cost and Earnings SHIPPING AND HANDLING OF PRODUCT December 30, 2017 December 31, 2016 $ 5,005 $ 4,435 2,573 4,748 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 The computation of earnings per share (“EPS”) is as follows (in thousands), which incorporate the retroactive effect of the Company’s 3 for 1 stock split: Numerator: December 30, December 31, December 26, 2017 2016 2015 Net earnings attributable to controlling interest Adjustment for earnings allocated to non-vested restricted common stock Net earnings for calculating EPS (2,225) $ 117,287 $ $ 119,512 $ 101,179 $ Denominator: Weighted average shares outstanding Adjustment for non-vested restricted common stock Shares for calculating basic EPS Effect of dilutive stock options Shares for calculating diluted EPS Net earnings per share: Basic Diluted (1,595) 99,584 $ 61,089 (963) 60,126 99 60,225 80,595 (1,059) 79,536 60,552 (795) 59,757 108 59,865 61,416 (1,143) 60,273 90 60,363 $ $ 1.95 $ 1.94 $ 1.66 $ 1.65 $ 1.33 1.33 35                   No options were excluded from the computation of diluted EPS for 2017, 2016, or 2015. 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. B. FAIR VALUE We apply the provisions of ASC 820, Fair Value Measurements and Disclosures, to assets and liabilities measured at fair value. Assets and liabilities measured at fair value are as follows: (in thousands) Money market funds Fixed income funds Equity securities Mutual funds: Domestic stock funds International stock funds Target funds Bond funds Total mutual funds Total Assets at fair value Quoted Prices in Active Markets (Level 1) December 30, 2017 Prices with Other Observable Inputs (Level 2) $ 64 $ 1,182 10,710 3,071 $ 6,974 — Quoted Prices in Active Markets (Level 1) December 31, 2016 Prices with Other Observable Inputs (Level 2) 64 $ 1,676 5,609 178 $ 2,592 — Total 242 4,268 5,609 Total 3,135 $ 8,156 10,710 367 91 270 209 937 — — — — — 367 91 270 209 937 $ $ 12,893 $ 10,045 $ 22,938 $ 12,893 $ 10,045 $ 22,938 $ 760 72 235 201 1,268 8,617 $ 8,617 $ — — — — — 760 72 235 201 1,268 2,770 $ 11,387 2,770 $ 11,387 We maintain money market, mutual funds, bonds, and/or stocks in our non-qualified deferred compensation plan and our wholly owned licensed captive insurance company. These funds are valued at prices quoted in an active exchange market and are included in "Cash and Cash Equivalents", "Investments", and "Other Assets". We have elected not to apply the fair value option under ASC 825, Financial Instruments, to any of our financial instruments except for those expressly required by U.S. GAAP. The valuations of the Level 2 assets or liabilities rely on quoted prices in markets that are not active or observable inputs over the full term of the asset or liability. We do not maintain any Level 3 assets or liabilities that would be based on significant unobservable inputs. During 2017, our wholly-owned captive, Ardellis Insurance Ltd. (“Ardellis”) transferred $4.1 million in fixed income securities from its Investment Account and purchased an additional $4.1 million in fixed income securities which are held in a newly formed collateral trust account in line with regulatory requirements in the State of Michigan to allow Ardellis to act as an admitted carrier in the State. These funds are intended to safeguard the insureds of the Michigan Branch of Ardellis. The funds are classified as “Restricted Investments”. 36 In accordance with our investment policy, our wholly-owned company, Ardellis Insurance Ltd. ("Ardellis"), maintains an investment portfolio, totaling $18.9 million as of December 30, 2017, consisting of mutual funds, domestic and international stocks, and fixed income bonds. Ardellis’ available for sale investment portfolio consists of the following: Fixed Income Equity Mutual Funds Total December 30,2017 Unrealized Gain/(Loss) Fair Value Cost Cost $ 8,170 $ 9,185 — (14) $ 8,156 $ 4,310 $ 1,524 10,709 — — 5,181 481 $ 17,355 $ 1,510 $ 18,865 $ 9,972 $ December 31,2016 Unrealized Gain/(Loss) Fair Value (43) $ 4,267 5,609 428 472 (9) 376 $ 10,348 Our Fixed Income investments consist of short, intermediate, and long term bonds, as well as fixed blend bonds. Within the fixed income investments, we maintain a specific mixture of US treasury notes, US agency mortgage backed securities, private label mortgage backed securities, and various corporate securities. Our equity investments consist of small, mid, and large cap growth and value funds, as well as international equity. The net pre-tax unrealized gain was $1.5 million. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of December 30, 2017. During 2017, Ardellis reported a net realized gain of $256 thousand which was recorded in interest income on the statement of earnings. C. BUSINESS COMBINATIONS We completed the following business combinations in fiscal 2017 and 2016, which were accounted for using the purchase method (in thousands). Company Name Silverwater Box Acquisition Date October 16, 2017 Purchase Price $931 cash paid for 100% asset purchase $ Net Intangible Assets Tangible Operating Segment Assets 909 $ 22 All Other A manufacturer and distributor of total packaging solutions in timber, plastic, steel, fiberglass, and cardboard. Silverwater Box has annual sales of approximately $2.8 million. The acquisition of Silverwater Box allows us to make progress on our goal of becoming a global provider of packaging solutions. May 26, 2017 $5,042 cash paid for 100% asset purchase $ 4,880 $ 162 South Go Boy Pallets, LLC ("Go Boy") A manufacturer and distributor of industrial pallets and packaging in Georgia and North Carolina. Go Boy has annual sales of approximately $8 million. The acquisition of Go Boy enabled us to expand our industrial packaging product offering and lumber sourcing in this region. March 6, 2017 $31,818 cash paid for 100% asset purchase $ 7,653 $ 24,165 South Robbins Manufacturing Co. ("Robbins") A manufacturer of treated wood products with facilities in Florida, Georgia, and North Carolina. Robbins has annual sales of approximately $86 million. The acquisition of Robbins allowed us to expand our presence in this region and serve customers more cost effectively. 37 Company Name Acquisition Date March 6, 2017 Purchase Price $22,789 cash paid for 100% asset purchase $ Net Intangible Assets Tangible Operating Segment Assets 14,341 $ 8,448 North Quality Hardwood Sales, LLC ("Quality") A manufacturer and supplier of hardwood products, including components of cabinets used in homes and recreational vehicles. Quality has annual sales of approximately $30 million. The acquisition of Quality enabled us to expand our product offering to include hardwood-based products. The UBEECO Group Pty. Ltd. ("Ubeeco") November 29, 2016 $9,449 cash paid for 100% stock purchase $ 8,553 $ 896 All Other A manufacturer and distributor of a variety of wood packaging and alternative material products, including boxes, crates, pallets, skids, protective packaging, packaging accessories and loose lumber. Ubeeco has annual sales of approximately $20 million. The acquisition of Ubeeco allows us to make progress on our goal of becoming a global provider of packaging solutions. September 16, 2016 $66,691 cash paid for 100% stock purchase which includes $11,337 in net cash received. Also, paid $86,294 to retire outstanding debt and $6,536 of certain other obligations. $ 17,455 $ 49,236 All Other A designer, manufacturer, and installer of customized interior fixtures and related products used in a variety of commercial structures. idX had annual sales of $300 million. The acquisition of idX enables us to enhance our design, product and service offering to become a tier 1 supplier of interior fixtures to retail customers, and continue to use idX's capabilities to continue to develop new markets for growth. Our goal is to achieve long-term synergies, including: idX Holdings, Inc. ("idX") a. Eliminating redundant administrative support costs. b. c. d. e. Using the scale advantage of the Company to reduce material costs of common raw materials. Utilizing manufacturing capacity of certain existing locations to supply idX. Utilizing idX’s international footprint to identify sourcing opportunities for certain products. Cross selling one another’s products and services with our respective customers. f. Collaborating on new product development. July 29, 2016 $1,246 cash paid for asset purchase $ 405 $ 841 North Seven D Truss, L.P. A manufacturer and distributor of roof and floor trusses. 7D had annual sales of approximately $4.0 million. The acquisition of 7D gave us the opportunity to consolidate operations with our Gordon, Pennsylvania location. June 30, 2016 $10,787 cash paid for 100% stock purchase plus $500 holdback. $ 6,817 $ 4,248 West Idaho Western, Inc. ("IWI") A supplier of products ranging from lumber and plywood to siding and doors. IWI had annual sales of approximately $21 million. The acquisition of IWI allowed us to expand our presence in Boise, Idaho and consolidate with our Rapid Wood operations. 38 Company Name Acquisition Date November 24, 2014 (majority interest) April 15, 2016 (minority interest) Purchase Price $7,506 November 24, 2014 cash paid for controlling interest and $1,877 cash paid for noncontrolling asset purchase Net Intangible Assets Tangible Operating Segment Assets $ 7,885 $ 1,498 West Packnet Ltd ("Packnet") A supplier of industrial packaging and services based in Eagan, MN. Packnet had annual sales of $9.6 million. The acquisition of Packnet gave us the opportunity to expand our presence in the region. April 15, 2016 $1,682 cash paid for asset purchase plus $205 assumed liability $ — $ 1,887 North Capital Components & Millwork, Inc. ("CCM") A producer of doors and trim for customers in the greater Washington, D.C., metro area and Virginia. CCM had approximately $16.6 million in annual sales. The acquisition of CCM allowed us to expand our product offering in the Washington, D.C. area. The intangible assets for each acquisition were finalized and allocated to their respective identifiable intangible asset and goodwill accounts during 2017, excluding Silverwater Box. At December 30, 2017, the amounts assigned to major intangible classes for the business combinations mentioned above are as follows (in thousands): Silverwater Box Go Boy Robbins Quality Ubeeco idX 7D IWI Tax Customer — $ — $ Goodwill - Non- Compete Agreements Relationships Tradename Goodwill Deductible — $ 4,880 7,653 14,341 — — 405 — 909 $ — 3,113 7,391 3,948 4,500 10,325 — 1,070 3,177 4,655 3,530 5,720 3,847 — — 2,570 225 560 830 183 2,630 405 — — $ — 450 400 575 — The business combinations mentioned above were not significant to our operating results individually or in aggregate, and thus pro forma results for 2017 and 2016 are not presented. E. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets of acquired businesses. Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to impairment tests at least annually in accordance with ASC 350, Intangibles-Goodwill and Other. We review the carrying amounts of goodwill and other non-amortizable intangibles by reporting unit to determine 39 if such assets may be impaired. As the carrying amount of these assets are recoverable based upon a discounted cash flow and market approach analysis, no impairment was recognized. The changes in the net carrying amount of goodwill by reporting segment for the years ended December 30, 2017 and December 31, 2016, are as follows (in thousands): Balance as of December 26, 2015 2016 Acquisitions Foreign Exchange, Net Balance as of December 31, 2016 2017 Acquisitions Foreign Exchange, Net Balance as of December 30, 2017 Total North West All Other — — South 43,253 43,625 84,553 — 133 3,177 14,329 (94) 9,559 180,990 17,506 39 43,386 43,625 87,730 23,794 198,535 11,413 2,696 $ 51,127 $ 46,738 $ 87,730 $ 27,049 $ 212,644 3,113 — 7,391 350 909 2,346 — — — Indefinite-lived intangible assets totaled $7.4 million and $2.3 million as of December 30, 2017 and December 31, 2016 related to the idX, International, and Consumer Products reporting units which is included in the All Other reportable segment. The following amounts were included in other amortizable intangible assets, net as of December 30, 2017 and December 31, 2016 (in thousands): Non-compete agreements Customer relationships Licensing agreements Patents Tradename Total Assets Assets 2017 Accumulated Amortization 2016 Accumulated Amortization $ 9,841 $ (4,208) $ 5,411 $ (1,954) (4,351) (2,991) (180) — $ 49,272 $ (14,362) $ 36,207 $ (9,476) 25,503 4,589 704 — 31,630 4,589 792 2,420 (5,986) (3,450) (254) (464) Amortization is computed principally by the straight-line method over the estimated useful lives of the intangible assets as follows: Intangible Asset Type Non-compete agreements Customer relationship Licensing agreements Tradename (amortizable) Weighted Average Estimated Useful Life Amortization Period 7.1 years 13.5 years 10 years 12.9 years 5 to 15 years 5 to 15 years 10 years 5 to 15 years Amortization expense of intangibles totaled $4.9 million, $2.8 million and $3.5 million in 2017, 2016 and 2015, respectively. The estimated amortization expense for intangibles for each of the five succeeding fiscal years is as follows (in thousands): 2018 2019 2020 2021 2022 Thereafter Total $ $ 4,879 4,264 3,234 2,979 2,676 16,878 34,910 40 F. DEBT On December 17, 2012, we entered into an unsecured Note Purchase Agreement (the "Agreement") under which we issued our 3.89% Series 2012 A Senior Notes, due December 17, 2022, in the aggregate principal amount of $35 million and our 3.98% Series 2012 B Senior Notes, due December 17, 2024, in the aggregate principal amount of $40 million. Proceeds from the sale of the Series A Senior Notes and Series B Senior Notes were used to repay amounts due on our existing Series 2002-A Senior Notes, Tranche B totaling $40 million and our revolving credit facility. On November 3, 2014, the Company entered into a five-year, $295 million unsecured revolving credit facility with a syndicate of U.S. banks led by JPMorgan Chase Bank, N.A., as administrative agent and Wells Fargo Bank, N.A., as syndication agent. The facilities include up to $45 million which may be advanced in the form of letters of credit, and up to $100 million (U.S. dollar equivalent) which may be advanced in Canadian dollars, Australian dollars, pounds Sterling, Euros and such other foreign currencies as may subsequently be agreed upon among the parties. This facility replaced our $265 million unsecured revolving credit facility. Cash borrowings are charged interest based upon an index selected by the Company, plus a margin that is determined based upon the index selected and upon the financial performance of the Company and certain of its subsidiaries. The Company is charged a facility fee on the entire amount of the lending commitment, at a per annum rate ranging from 15 to 32.5 basis points, also determined based upon the Company’s performance. The facility fee is payable quarterly in arrears. Outstanding letters of credit extended on our behalf on December 30, 2017 and December 31, 2016 aggregated $26.5 million and $25.5 million; respectively, which includes approximately $9.8 million related to industrial development revenue bonds. The Company had an outstanding balance of $59.4 million and 23.9 million on its revolver at December 30, 2017, and December 31, 2016, respectively. After considering letters of credit, the Company had $225.7 million and $261.3 million in remaining availability on its revolver on December 30, 2017, and December 31, 2016, respectively. Additionally, we have $150 million in availability under a "shelf agreement" for long term debt with a current lender. Letters of credit have one year terms and include an automatic renewal clause. The letters of credit related to industrial development revenue bonds are charged an annual interest rate of 110 basis points, based upon our financial performance. The letters of credit related to workers’ compensation are charged an annual interest rate of 75 basis points. 41 Long-term debt obligations are summarized as follows on December 30, 2017 and December 31, 2016 (amounts in thousands): Series 2012 Senior Notes Tranche A, due on December 17, 2022, interest payable semi- annually at 3.89% Series 2012 Senior Notes Tranche B, due on December 17, 2024, interest payable semi- annually at 3.98% Revolving credit facility totaling $295 million due on November 3, 2019, interest payable monthly at a floating rate (2.41% on December 30, 2017 and 1.67% on December 31, 2016) Series 1999 Industrial Development Revenue Bonds, due on August 1, 2029, interest payable monthly at a floating rate (1.08% on December 30, 2017 and 0.52% on December 31, 2016) Series 2000 Industrial Development Revenue Bonds, due on October 1, 2020, interest payable monthly at a floating rate (1.14% on December 30, 2017 and 0.59% on December 31, 2016) Series 2002 Industrial Development Revenue Bonds, due on December 1, 2022, interest payable monthly at a floating rate (1.13% on December 30, 2017 and 0.57% on December 31, 2016) Capital leases and foreign affiliate debt Less current portion Less debt issuance costs Long-term portion 2017 2016 $ 35,000 $ 35,000 40,000 40,000 59,422 23,860 3,300 3,300 2,700 2,700 3,700 2,058 146,180 (1,329) (177) 3,700 3,336 111,896 (2,634) (203) $ 144,674 $ 109,059 Financial covenants on the unsecured revolving credit facility and unsecured notes include 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 among other industry standard covenants. We were within all of our lending requirements on December 30, 2017 and December 31, 2016. On December 30, 2017, the principal maturities of long-term debt and capital lease obligations are as follows (in thousands): 2018 2019 2020 2021 2022 Thereafter Total $ 1,329 59,737 2,891 135 38,788 43,300 $ 146,180 On December 30, 2017, the estimated fair value of our long-term debt, including the current portion, was $148.0 million, which was $1.8 million more 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. We consider the valuations of our long-term debt, including the current portion, to be Level 2 liabilities which rely on quoted prices in markets that are not active or observable inputs over the full term of the liability. G. LEASES We lease certain real estate under operating 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 aircraft under operating lease 42 agreements for periods of one to ten years. Future minimum payments under non-cancelable operating leases on December 30, 2017 are as follows (in thousands): 2018 2019 2020 2021 2022 Thereafter Total minimum lease payments Operating Leases 19,405 13,187 9,967 7,778 5,947 17,640 73,924 $ $ Rent expense was approximately $22.3 million, $10.5 million, and $6.3 million in 2017, 2016, and 2015, respectively. H. 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 these 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 totaled $2.0 million and $2.4 million on December 30, 2017 and December 31, 2016, respectively, and are included "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 and salaries. The Plan provides investment options similar to our 401(k) plan, including our stock. The investment in our stock is funded by the issuance of shares to a Rabbi trust, and may only be distributed in kind. Assets held by the Plan totaled approximately $1.0 million and $0.9 million on December 30, 2017 and December 31, 2016 respectively, and are included in "Other Assets." Related liabilities totaled $22.6 million and $17.4 million on December 30, 2017 and December 31, 2016, respectively, and are included in "Other Liabilities" and "Shareholders’ Equity." Assets associated with 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. I. COMMON STOCK In April 2002, our shareholders approved the 2002 Employee Stock Purchase Plan ("Stock Purchase Plan") to succeed the Employee Stock Purchase Plan originally approved in 1994. In April 2008, our shareholders authorized additional shares to be allocated to the Stock Purchase Plan and extended the term of the Stock Purchase Plan to 2018. The plan allows eligible employees to purchase shares of our stock at a share price equal to 85% of fair market value on the purchase date. We have expensed the fair value of the compensation associated with these awards, which approximates the discount. The amount of expense is nominal. In April 1994, our shareholders approved the Directors’ Retainer Stock Plan ("Stock Retainer Plan"). In April 2007, our shareholders authorized additional shares to be issued pursuant to this plan. The Stock Retainer Plan allows eligible members of the Board of Directors to defer the cash portion of their retainer and committee fees and receive shares of our stock at the time of or following their retirement, disability or death. The number of shares to be received is equal to the amount of the cash portion of their retainer and committee fees deferred multiplied by 110%, divided by the fair market value of a share of our stock at the time of deferral. The number of shares is increased by the amount of dividends paid on the Company’s common stock. We recognized expense for this plan of $1.7 million in 43 2017, $0.7 million in 2016, and $0.6 million in 2015. Effective January 1, 2017, this plan was amended to allow directors to defer payment of the annual retainer paid in the form of our common stock. On April 15, 2010, our shareholders approved an amended and restated Long Term Stock Incentive Plan (the "LTSIP”). The LTSIP reserves 1,000,000 shares, plus a balance of unused shares from prior plans of approximately 1.6 million shares, plus an annual increase of no more than 200,000 shares per year which may be added on the dates of our annual shareholder meetings. The LTSIP provides for the grant of stock options, stock appreciation rights, restricted stock, performance shares and other stock-based awards. On October 18, 2017, the Board of Directors approved a three-for-one split of the Company's outstanding shares of common stock effected as a stock dividend. On November 14, 2017, shareholders of record as of October 31, 2017, received two additional shares for each share held on the record date. There is no unrecognized compensation expense remaining for stock options in 2017, 2016, and 2015. A summary of the nonvested restricted stock awards granted under the LTSIP is as follows: Nonvested at December 27, 2014 Granted Vested Forfeited Nonvested at December 26, 2015 Granted Vested Forfeited Nonvested at December 31, 2016 Granted Vested Forfeited Nonvested at December 30, 2017 Restricted Awards 771,258 228,963 (364,926) (11,547) 623,748 350,892 (180,465) (2,643) 791,532 388,248 (141,111) (5,043) 1,033,626 $ Weighted- Average Grant Date Fair Value 12.13 18.00 12.87 16.28 13.66 23.96 15.66 21.45 19.32 32.03 12.71 30.14 24.24 $ Weighted- Unrecognized Average Compensation Period to Recognize Expense 1.7 1.81 years Expense (in millions) 5.2 2.53 years 4.8 1.51 years 7.1 1.31 years Under the Stock Purchase Plan and LTSIP, we recognized share-based compensation expense of $3.6 million, $2.2 million, and $1.8 million and the related total income tax benefits of $1.0 million, $1.1 million, and $0.9 million in 2017, 2016 and 2015, respectively. In 2017, 2016 and 2015, cash received from option exercises and share issuances under our plans was $0.7 million, $0.5 million and $1.1 million, respectively. The actual tax benefit realized in 2017, 2016 and 2015 for the tax deductions from option exercises totaled $0.0 million, $0.0 million and $0.4 million, respectively. On November 14, 2001, the Board of Directors approved a share repurchase program (which succeeded a previous program) allowing us to repurchase up to 2.5 million shares of our common stock. On October 14, 2010, our Board authorized an additional 2 million shares to be repurchased under our share repurchase program. We repurchased 445,740 and 0 shares under this program in 2017 and 2016, respectively. As of December 30, 2017, the cumulative total authorized shares available for repurchase is approximately 2.7 million shares. J. 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 wholly-owned subsidiaries. Amounts contributed to the plan are made at the discretion of the 44 Board of Directors. We matched 25% of employee contributions in 2017, 2016, and 2015, on a discretionary basis, totaling $4.8 million, $4.4 million, and $2.4 million respectively. The basis for matching contributions may not exceed the lesser of 6% of the employee’s annual compensation or the IRS limitation. On July 14, 2011, the compensation committee of the board of directors approved a retirement plan for certain officers of the Company (who have at least 20 years of service with the Company and at least 10 years of service as an officer) whereby we will pay, upon retirement, benefits totaling 150% of the officer’s highest base salary in the three years immediately preceding separation from service plus health care benefits for a specified period of time if certain eligibility requirements are met. Approximately $7.8 million and $6.5 million are accrued in “Other Liabilities” for this plan at December 30, 2017 and December 31, 2016, respectively. K. INCOME TAXES Income tax provisions for the years ended December 30, 2017, December 31, 2016, and December 26, 2015 are summarized as follows (in thousands): 2017 2016 2015 Currently Payable: Federal State and local Foreign Net Deferred: Federal State and local Foreign $ 44,413 $ 42,397 $ 34,672 6,643 5,599 46,914 8,579 6,240 59,232 6,341 6,143 54,881 (7,681) (864) 1,280 (7,265) (1,104) 96 (36) (1,044) $ 51,967 $ 55,174 $ 45,870 (455) 438 310 293 The components of earnings before income taxes consist of the following: 2017 2016 2015 U.S. Foreign Total reasons: The effective income tax rates are different from the statutory federal income tax rates for the following $ 151,395 $ 140,106 $ 115,231 15,771 $ 176,007 $ 160,671 $ 131,002 20,565 24,612 Statutory federal income tax rate State and local taxes (net of federal benefits) Effect of noncontrolling owned interest in earnings of partnerships Manufacturing deduction Tax credits, including foreign tax credit Change in uncertain tax positions reserve Other permanent differences Other, net Impact of Tax Act and reduction of corporate tax rate Effective income tax rate 2017 2016 2015 35 % 3.0 (0.2) (2.5) (2.0) 0.4 (0.1) (0.6) (3.5) 29.5 % 35 % 3.1 (0.2) (2.4) (1.4) 0.4 0.1 (0.3) — 34.3 % 35 % 3.6 (0.3) (2.4) (1.6) 0.3 0.7 (0.3) — 35.0 % 45 Temporary differences which give rise to deferred income tax assets and (liabilities) on December 30, 2017 and December 31, 2016 are as follows (in thousands): Employee benefits Net operating loss carryforwards Foreign subsidiary capital loss carryforward Other tax credits Inventory Reserves on receivables Accrued expenses Other, net Gross deferred income tax assets Valuation allowance Deferred income tax assets Depreciation Intangibles Other, net Deferred income tax liabilities Net deferred income tax liability 2017 2016 $ 17,048 $ 13,375 13,605 509 1,196 2 1,208 8,931 2,323 41,149 (5,371) 35,778 (29,971) (25,078) — (55,049) $ (12,214) $ (19,271) 8,592 546 709 358 714 2,060 1,879 31,906 (4,706) 27,200 (19,992) (19,422) — (39,414) As of December 30, 2017, the company had federal, state and foreign net operating loss carryforwards of $8.6 million and state tax credit carryforwards of $0.5 million, which will expire at various dates. The Company also has a $0.2 million federal alternative minimum tax credit which it expects to be refunded. The NOL and credit carryforwards expire as follows: 2017 – 2021 2022 - 2026 2027 - 2031 2032 - 2036 Thereafter Total State Net Operating Losses U.S. $ Tax Credits Foreign U.S. State — $ 356 $ 2,106 $ — $ 270 233 — — — — 3,431 — — $ 3,431 $ 2,575 $ 2,586 $ — $ 503 — — — — 243 156 — 81 391 605 804 419 As of December 30, 2017, we believe that it is more likely than not that the benefit from certain state and foreign NOL carryforwards as well as certain state tax credit carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance against various NOL and tax credit carryforwards. Furthermore, there is a valuation allowance of $0.5 million against a capital loss carryforward we have for a wholly-owned subsidiary, UFP Canada, Inc. Based upon the business activity and the nature of the assets of this subsidiary, our ability to realize a future benefit from this carryforward is doubtful. The capital loss has an unlimited carryforward and therefore will not expire unless there is a change in control of the subsidiary. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the ”Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that will affect 2017, including, but not limited to, (1) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years and (2) bonus depreciation that will allow for full expensing of qualified property. The Tax Act also established new tax laws that will affect 2018, including, but not limited to, (1) reduction of the U.S. federal corporate tax rate; (2) elimination of the corporate alternative minimum tax (AMT); (3) the creation of the base erosion anti-abuse tax (BEAT), a new minimum tax: (4) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (5) a new provision designed to tax global intangible low-taxed income (GILTI), which allows 46 for the possibility of using foreign tax credits (FTCs) and a deduction of up to 50 percent to offset the income tax liability (subject to some limitations); (6) a new limitation on deductible interest expense; (7) the repeal of the domestic production activity deduction; (8) limitations on the deductibility of certain executive compensation; (9) limitations on the use of FTCs to reduce the U.S. income tax liability; and (10) limitations on net operating losses (NOLs) generated after December 31, 2017, to 80 percent of taxable income. The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. In connection with our initial analysis of the impact of the Tax Act, we have recorded a discrete net tax benefit of $6.1 million in the period ending December 30, 2017. This net benefit primarily consists of (1) a net benefit for the corporate rate reduction of $8.2 million; (2) a net expense for the write-down of deferred tax assets for stock based compensation that will no longer be deductible for $1.9 million; and (3) a net expense for the transition tax of $0.2 million. For various reasons that are discussed more fully below, we have not completed our accounting for the income tax effects of certain elements of the Tax Act. If we were able to make reasonable estimates of the effects of elements for which our analysis is not yet complete, we recorded provisional adjustments. If we were not yet able to make reasonable estimates of the impact of certain elements, we have not recorded any adjustments related to those elements and have continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the Tax Act. Our accounting for the following elements of the Tax Act is incomplete. However, we were able to make reasonable estimates of certain effects and, therefore, recorded provisional adjustments as follows: Reduction of U.S. federal corporate tax rate: The Tax Act reduces the corporate tax rate to 21 percent, effective January 1, 2018. For certain of our DTAs and DTLs, we have recorded a provisional decrease of $13.6 million and $21.8 million, respectively, with a corresponding net adjustment of deferred income tax benefit of $8.2 million for the year ended December 30, 2017. While we are able to make a reasonable estimate of the impact of the reduction in corporate rate, it may be affected by other analysis related to the Tax Act, including, but not limited to, our calculation of deemed repatriation of deferred foreign income and the state tax effect of adjustments made to federal temporary differences. Deemed Repatriation Transition Tax: The Deemed Repatriation Transition Tax (Transition Tax) is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. We are able to make a reasonable estimate of the Transition Tax and recorded a provisional Transition Tax obligation comprised of $6.3 million tax on foreign earnings and offset by FTCs of $6.1 million. However, we are continuing to gather additional information to more precisely compute the amount of the Transition Tax for any potential state tax effects and we are still evaluating the remaining outside basis differences not closed by the imposition of the transition tax. Tentatively, no changes were made to our ASC 740-30 assertion. Cost recovery: While we have not yet completed all of the computations necessary or completed an inventory of our 2017 expenditures that qualify for immediate expensing, we have recorded a provisional benefit of $0.1 million based on our current intent to fully expense all qualifying expenditures. This resulted in a decrease of approximately $0.3 million to our current income tax payable and a corresponding increase in our DTLs of approximately $0.2 million (after considering the effects of the reduction in income tax rates). Our accounting for the following elements of the Tax Act is incomplete, and we were not yet able to make reasonable estimates of the effects. Therefore, no provisional adjustments were recorded. 47 Global intangible low taxed income (GILTI): The Tax Act creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations (CFCs) must be included currently in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the shareholder’s “net CFC tested income” over the net deemed tangible income return, which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income. Because of the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). Our selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Because whether we expect to have future U.S. inclusions in taxable income related to GILTI depends on not only our current structure and estimated future results of global operations but also our intent and ability to modify our structure and/or our business, we are not yet able to reasonably estimate the effect of the provision of the Tax Act. Therefore, we have not made any adjustments related to potential GILTI tax in our financial statements and have not made a policy decision regarding whether to record deferred taxes on GILTI. Valuation allowances: The company must assess whether valuation allowances assessments are affected by various aspects of the Tax Act (e.g., deemed repatriation of deferred foreign income and the effects on state NOLs, GILTI inclusions, new categories of FTCs). Since, as discussed herein, the company has recorded no amounts related to certain portions of the Tax Act, any corresponding determination of the need for or change in a valuation allowance has not be completed and no changes to valuation allowances as a result of the Tax Act have been recorded. The remaining provisions of the Tax Act, as listed above, became effective on January 1, 2018 and did not require accounting treatment for the year-ended December 30, 2017. We are currently analyzing the impact of these provisions. L. ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES ASC 740, Income Taxes (“ASC 740”) clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, and disclosure requirements. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): 2017 2016 2015 Gross unrecognized tax benefits beginning of year Increase in tax positions for prior years Increase in tax positions due to acquisitions Increase in tax positions for current year Settlements with taxing authorities Lapse in statute of limitations Gross unrecognized tax benefits end of year $ 3,381 $ 2,209 $ 1,793 — — 754 — (338) $ 4,000 $ 3,381 $ 2,209 4 — 1,107 (2) (490) 243 362 905 (32) (306) Our effective tax rate would have been affected by the unrecognized tax benefits had this amount been recognized as a reduction to income tax expense. We recognized interest and penalties for unrecognized tax benefits in our provision for income taxes. The liability for unrecognized tax benefits included accrued interest and penalties of $0.7 million, $0.6 million, and $0.2 million at December 30, 2017, December 31, 2016, and December 26, 2015, respectively. 48 We file income tax returns in the United States and in various state, local and foreign jurisdictions. The federal and a majority of state and foreign jurisdictions are no longer subject to income tax examinations for years before 2014. A number of routine state and local examinations are currently ongoing. Due to the potential for resolution of state examinations, and the expiration of various statutes of limitation, and new positions that may be taken, it is reasonably possible that the amounts of unrecognized tax benefits could change in the next twelve months is $0.7 million. M. COMMITMENTS, CONTINGENCIES, AND GUARANTEES We are self-insured for environmental impairment liability, including certain liabilities which are insured through a wholly owned subsidiary, Ardellis 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. Environmental reserves, calculated with no discount rate, have been established to cover remediation activities at wood preservation facilities in Stockertown, PA; Elizabeth City, NC; Auburndale, FL; and Medley, FL. In addition, a reserve was established for our facility in Thornton, CA to remove certain lead containing materials which existed on the property at the time of purchase. On a consolidated basis, we have reserved approximately $3.0 million and $3.6 million on December 30, 2017 and December 31, 2016, respectively, representing the estimated costs to complete future remediation efforts. These amounts have not been reduced by an insurance receivable. Many of our wood treating operations utilize “Subpart W” drip pads, defined as hazardous waste management units by the Environmental Protection Agency. The rules regulating drip pads require that a pad be “closed” at the point that it is no longer intended to be used for wood treating operations or to manage hazardous waste. Closure involves identification and disposal of contaminants which are required to be removed from the facility. The cost of closure is dependent upon a number of factors including, but not limited to, identification and removal of contaminants, cleanup standards that vary from state to state, and the time period over which the cleanup would be completed. Based on our present knowledge of existing circumstances, it is considered probable that these costs will approximate $0.2 million. As a result, this amount is recorded in other long-term liabilities on December 30, 2017. In February 2014, one of our operations was served with a federal grand jury subpoena from the Southern District of New York. The subpoena was issued in connection with an investigation being conducted by the US Attorney’s Office for the Southern District of New York. The subpoena requested documents relating to a developer and construction projects for which our operation had provided materials and labor. Following receipt of the subpoena, the Audit Committee of the Company’s Board of Directors retained outside counsel to conduct an internal investigation and respond to the subpoena. The Company cooperated in all respects with the US Attorney’s Office, complied with this subpoena and voluntarily provided additional information. As a result of the internal investigation, in 2014, two Company employees were terminated for violating the Company’s Code of Business Conduct and Ethics. In May 2015, those ex-employees were indicted by the grand jury. In April 2016, one of the two former employees pled guilty to four of the charges included in the indictment. In May 2016, the other former employee was found guilty by a jury on four of the charges included in the indictment. The Company has not been named as a target and continues to cooperate with the US Attorney’s Office in this matter. Based upon prior communications with the US Attorney’s Office, we do not believe that the resolution of this matter will have a material adverse impact on our financial condition or the results of our operations. In addition, on December 30, 2017, we were parties either as plaintiff or 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 30, 2017, we had outstanding purchase commitments on commenced capital projects of approximately $7.7 million. 49 We provide a variety of warranties for products we manufacture. Historically, warranty claims have not been material. We distribute products manufactured by other companies, some of which are no longer in business. While we do not warrant these products, we have received claims as a distributor of these products when the manufacturer no longer exists or has the ability to pay. Historically, these costs have not had a material affect on our consolidated financial statements. As part of our operations, we supply building materials and labor to site-built construction projects or we jointly bid on contracts with framing companies for such projects. In some instances we are required to post payment and performance bonds to insure the project 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. As of December 30, 2017, we had approximately $1.4 million in outstanding payment and performance bonds for open projects. We had approximately $7.6 million in payment and performance bonds outstanding for completed projects which are still under warranty. On December 30, 2017 we had outstanding letters of credit totaling $26.5 million, primarily related to certain insurance contracts and industrial development revenue bonds described further 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 $16.7 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 industrial development revenue bonds that have been issued. These letters of credit guarantee principal and interest payments to the bondholders. We currently have irrevocable letters of credit outstanding totaling approximately $9.8 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 2012 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. We did not enter into any new guarantee arrangements during 2017 which would require us to recognize a liability on our balance sheet. N. SEGMENT REPORTING ASC 280, Segment Reporting (“ASC 280”), 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. The Company operates manufacturing, treating and distribution facilities throughout North America, Europe, Asia and Australia, but primarily in the United States. The Company manages the operations of its individual locations primarily through a geographic reporting structure under which each location is included in a region and regions are included in our North, South, West, and International divisions. The exceptions to this geographic reporting and management structure are (a) the Company’s Alternative Materials Division, which offers a portfolio of non-wood products and distributes those products nation-wide and is accounted for as a reporting unit within the All Other segment, (b) the Company’s distribution unit (referred to as UFPD) which distributes a variety of products to the manufactured housing industry and is accounted for as a reporting unit within the North segment, and (c) idX division, which designs, manufactures, and installs customized interior fixtures and is accounted for within the All Other segment. 50 With respect to the facilities in the north, south, and west segments, these facilities generally supply the three markets the Company serves nationally - Retail, Industrial, and Construction. Also, substantially all of our facilities support customers in the immediate geographical region surrounding the facility. Our Alternative Materials, International, and idX divisions have been included in the “All Other” column of the table below. The “Corporate” column includes unallocated administrative costs and certain incentive compensation expense. North South West Other Corporate Total 2017 All Net sales to outside customers Intersegment net sales Interest expense (income) Amortization expense Depreciation expense Segment earnings from operations Segment assets Capital expenditures Net sales to outside customers Intersegment net sales Interest expense Amortization expense Depreciation expense Segment earnings from operations Segment assets Capital expenditures Net sales to outside customers Intersegment net sales Interest expense Amortization expense Depreciation expense Segment earnings from operations Segment assets Capital expenditures $ 1,133,656 $ 837,370 $ 1,417,924 $ 552,232 $ 67,161 4 559 10,511 61,326 351,270 23,026 74,566 160 607 6,880 46,646 240,661 12,286 83,245 293 1,723 14,116 82,465 462,311 23,212 167,568 (473) 1,971 8,586 17,296 356,264 9,865 — $ 3,941,182 392,540 — 6,218 6,234 4,860 — 48,536 8,443 (26,264) 181,469 1,464,677 54,171 71,116 2,727 North South West Other Corporate Total 2016 All $ 1,000,426 $ 711,862 $ 1,251,093 $ 277,112 $ 57,770 1 115 8,948 59,408 302,009 10,902 38,641 307 — 6,190 47,146 192,085 5,571 88,311 387 1,858 13,326 76,875 438,674 19,648 19,322 143 822 4,531 16,639 313,304 6,037 2015 All — $ 3,240,493 204,044 — 4,575 3,737 2,795 — 40,823 7,828 (35,630) 164,438 1,292,058 45,986 53,762 11,604 North $ 922,092 $ 656,550 $ 1,133,398 $ 175,031 $ Other South West Corporate Total 51,796 — 267 7,901 53,879 279,664 9,622 29,940 296 9 6,255 30,740 192,756 6,138 58,412 516 2,467 13,033 70,220 382,251 13,356 13,673 52 788 3,707 3,038 152,527 6,698 — $ 2,887,071 153,821 — 5,133 4,269 3,531 — 37,710 6,814 (22,410) 135,467 1,107,679 100,481 43,522 7,708 Information regarding principal geographic areas was as follows (in thousands): 2017 Long-Lived Tangible 2016 Long-Lived Tangible 2015 Long-Lived Tangible United States Foreign Total Assets Net Sales $ 3,821,366 $ 313,976 $ 3,162,331 $ 280,362 $ 2,811,359 $ 244,040 15,408 $ 3,941,182 $ 344,356 $ 3,240,493 $ 306,468 $ 2,887,071 $ 259,448 Net Sales Net Sales 119,816 26,106 30,380 78,162 75,712 Assets Assets Sales generated in Canada and Mexico are primarily to customers in the United States of America. 51 The following table presents, for the periods indicated, our percentage of value-added and commodity-based sales to total sales. 2017 2016 2015 Value-Added Commodity- Based 63.3 % 62.6 % 59.8 % 36.7 % 37.4 % 40.2 % Value-added product sales consist of fencing, decking, lattice, and other specialty products sold to the retail building materials market, specialty wood packaging, engineered wood components, in-store fixtures, 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. Commodity-based product sales consist primarily of remanufactured lumber and preservative treated lumber. 52 The following table presents, for the periods indicated, our gross sales (in thousands) by major product classification. Year Ended December 30, December 31, December 26, 2017 2016 2015 $ 368,591 $ 187,905 244,910 149,520 471,262 76,507 260,174 78,638 61,226 110,327 265,048 48,736 75,742 85,016 21,218 17,584 3,329 9,275 334,956 $ 299,111 149,526 176,668 177,787 200,004 129,803 141,474 374,030 391,610 67,804 76,503 — 87,262 59,804 68,517 46,496 53,279 56,846 106,284 200,901 204,732 47,392 50,556 57,999 60,753 45,215 66,048 17,123 20,713 13,611 17,412 5,353 3,449 5,668 7,518 $ 2,535,008 $ 2,067,738 $ 1,754,469 576,374 575,505 271,310 34,970 13,036 469,042 479,333 238,806 30,374 12,084 458,023 423,543 253,678 31,789 10,978 $ 1,471,195 $ 1,229,639 $ 1,178,011 $ 4,006,203 $ 3,297,377 $ 2,932,480 (45,409) $ 3,941,182 $ 3,240,493 $ 2,887,071 (56,884) (65,021) Value-Added Sales Trusses – residential, modular and manufactured housing Fencing Decking and railing – composite, wood and other Turn-key framing and installed sales Industrial packaging and components Engineered wood products (eg. LVL; i-joist) In-store fixtures Manufactured brite and other lumber Wall panels Outdoor DIY products (eg. stakes; landscape ties) Construction and building materials (eg. door packages; drywall) Lattice – plastic and wood Manufactured brite and other panels Siding, trim and moulding Hardware Manufactured treated lumber Manufactured treated panels Other Total Value-Added Sales Commodity-Based Sales Non-manufactured brite and other lumber Non-manufactured treated lumber Non-manufactured brite and other panels Non-manufactured treated panels Other Total Commodity-Based Sales Total Gross Sales Sales allowances Total Net Sales 53 Net sales Gross profit Net earnings Net earnings attributable to controlling interest Basic earnings per share Diluted earnings per share O. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following table sets forth selected financial information for all of the quarters, consisting of 13 and 14 weeks during the years ended December 30, 2017 and December 31, 2016, respectively, (in thousands, except per share data): First Second Third Fourth 2017 2016 2017 2016 2017 2016 2017 2016 $ 846,130 $ 682,151 $ 1,072,375 $ 872,093 $ 1,056,586 $ 826,665 $ 966,091 $ 859,584 122,310 22,241 129,159 33,162 118,054 28,764 120,740 21,634 102,739 20,255 131,487 34,237 144,687 34,669 148,240 34,574 21,062 19,212 33,642 33,398 33,693 27,819 31,115 20,750 0.34 0.32 0.55 0.55 0.55 0.45 0.51 0.34 0.34 0.32 0.55 0.55 0.55 0.45 0.51 0.34 P. SUBSEQUENT EVENTS Subsequent to December 30, 2017, the Company completed a sale and lease-back transaction with a property in Medley, Florida. The sale price for the property was approximately $36 million and created a $7 million pre-tax gain. The transaction is part of a strategy to create efficiencies and advantages not possible with the current facility by optimizing the capacity of its other three Florida operations, including two it acquired from Robbins Manufacturing in 2017, and adding a state-of-the-art facility in South Florida. The Company will lease back the Medley, Florida, facility for two years as it executes its long-term plan for Florida and the Southeast region. 54 PRICE RANGE OF COMMON STOCK AND DIVIDENDS Our common stock trades on The Nasdaq Stock Market (“NASDAQ”) under the symbol UFPI. The following table sets forth the range of high and low sales prices, which incorporate the retroactive effect of the Company’s 3 for 1 stock split, as reported by NASDAQ. Fiscal 2017 Fourth Quarter Third Quarter Second Quarter First Quarter High Low Fiscal 2016 39.16 32.72 32.80 35.70 32.50 Fourth Quarter 26.28 Third Quarter 28.43 Second Quarter 31.34 First Quarter High 35.70 36.66 30.50 27.86 Low 27.80 28.26 25.55 20.35 There were approximately 1,450 shareholders of record as of February 23, 2018. We paid dividends on our common stock of $0.15 and $0.17 per share in June and December 2017, respectively. In June and December 2016, we paid dividends of $0.14 and $0.15 per share, respectively. We intend to continue with our current semi-annual dividend policy for the foreseeable future. 55 STOCK PERFORMANCE GRAPH The following graph depicts the cumulative total return on our common stock compared to the cumulative total return on the indices for The Nasdaq Stock Market (all U.S. companies) and an industry peer group we selected. The graph assumes an investment of $100 on December 29, 2012, and reinvestment of dividends in all cases. The companies included in our self-determined industry peer group are as follows: American Woodmark Corporation Bemis Company, Inc. BlueLinx Holdings, Inc. BMC Stock Holdings, Inc. Boise Cascade, LLC Builders FirstSource, Inc. Gibraltar Industries, Inc. Greif Bros. Corporation Louisiana-Pacific Corporation Masco Corporation NCI Building Systems, Inc. Simpson Manufacturing Company,Inc. Sonoco Products Company Trex Company, Inc. Westrock Company The returns of each company included in the self-determined peer group are weighted according to each respective company’s stock market capitalization at the beginning of each period presented in the graph above. In determining the members of our peer group, we considered companies who selected UFPI as a member of their peer group, and looked for similarly sized companies or companies that are a good fit with the markets we serve. 56 BOARD OF DIRECTORS EXECUTIVE OFFICERS Directors and Executive Officers William G. Currie Chairman of the Board Universal Forest Products, Inc. Matthew J. Missad Chief Executive Officer Universal Forest Products, Inc. John M. Engler Interim President Michigan State University Gary F. Goode, CPA Chairman Titan Sales & Consulting, LLC Thomas W. Rhodes President and Chief Executive Officer TWR Enterprises, Inc. Bruce A. Merino Mary E. Tuuk Chief Compliance Officer Meijer, Inc. Brian C. Walker Chief Executive Officer Herman Miller, Inc. Michael G. Wooldridge Partner Varnum, LLP Matthew J. Missad Chief Executive Officer Patrick M. Webster President and Chief Operating Officer Michael R. Cole Chief Financial Officer and Treasurer Allen T. Peters President UFP Western Division Patrick Benton President UFP Northern Division Jonathan West President UFP Southern Division Robert D. Coleman Executive Vice President Manufacturing C. Scott Greene Executive Vice President Marketing Donald L. James Executive Vice President National Sales Michael F. Mordell Executive Vice President International Operations Chad C. Uhlig Eastin Executive Vice President Purchasing 57 ANNUAL MEETING Shareholder Information The annual meeting of Universal Forest Products, Inc. will be held at 8:30 a.m. on April 18, 2018, at 2880 East Beltline Lane NE, Grand Rapids, MI 49525. 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, Inc. 2801 East Beltline NE Grand Rapids, MI 49525 Telephone: (616) 364-6161 Web: www.ufpi.com SECURITIES COUNSEL Varnum, LLP Grand Rapids, MI INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP Grand Rapids, MI TRANSFER AGENT/SHAREHOLDER 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. 6201 15th Ave Brooklyn, NY 11219 Telephone: (800) 937-5449 UNIVERSAL FOREST PRODUCTS®, INC., CORPORATE HEADQUARTERS 2801 East Beltline NE Grand Rapids, MI 49525 Telephone: (616) 364-6161 Facsimile: (616) 364-5558 58 Schertz, TX Selma, AL Shanghai, China Shawnee, OK Shibuya-ku, Tokyo, Japan Sidney, NY Snohomish, WA Spring Lake, MI Stanfield, NC Stockertown, PA Swindon, Wiltshire, United Kingdom Tacoma, WA Thomaston, GA Thornton, CA Union City, GA Warrens, WI Washington, NC Wenatchee, WA White Bear Lake, MN White Pigeon, MI Windsor, CO Woodburn, OR Wujiang City, China Yakima, WA Yeerongpilly, QLD, Australia UNIVERSAL FOREST PRODUCTS®, INC., AND ITS AFFILIATES Locations: Ashburn, GA Athena, OR Auburn, NY Auburndale, FL Aurora, CO Bangalore, India Barnesville, GA Belchertown, MA Berlin, NJ Biscoe, NC Blanchester, OH Bomaderry, NSW, Australia Bridgeton, MO Burlington, NC Cedar Hill, TX Chaffee, NY Chandler, AZ Chesapeake, VA Chicago, IL Chino, CA Church Hill, TN Clinton, NC Columbia, MD Concord, Ontario, Canada Conway, SC Cordele, GA Dallas, TX Dayton, OH Durango, Mexico Eagan, MN Earth City, MO Eatonton, GA Elizabeth City, NC Elkhart, IN Elkwood, VA Embalaje, Mexico Erskine Park, NSW, Australia Folkston, GA Franklinton, NC Fredericksburg, VA Gainesville, GA Gilmer, TX Gordon, PA Grand Rapids, MI Grandview, TX Granger, IN Greene, ME Haleyville, AL Hamilton, OH Harrisonville, MO Hillsboro, TX Hudson, NY Huntsville, TX Janesville, WI Jefferson, GA Jeffersonville, IN Kansas City, MO Kearneysville, WV Kyle, TX Lacolle, Quebec, Canada Lafayette, CO Liberty, NC Lockhart, FL Locust, NC Magna, UT McMinnville, OR Medley, FL Merciditas, Puerto Rico Mexico City, Mexico Minneota, MN Morristown, TN Moultrie, GA Muscle Shoals, AL Nampa, ID Nappanee, IN Naugatuck, CT New Delhi, India New Hartford, NY New London, NC New Waverly, TX New Windsor, MD New York, NY Ontario, CA Ooltewah, TN Parker, PA Pearisburg, VA Peru, IL Plainville, MA Poulsbo, WA Prairie du Chien, WI Puyallup, WA Ranson, WV Riverside, CA Rockwell, NC Saginaw, MI Saginaw, TX Salina, KS Salisbury, NC San Antonio, TX Sauk Rapids, MN 59 LIST OF REGISTRANT'S SUBSIDIARIES AND AFFILIATES UFP Gear, LLC UFP Global Holdings Limited UFP Gordon, LLC UFP Grandview, LLC UFP Granger, LLC UFP Great Lakes, LLC UFP Gulf, LLC UFP Haleyville, LLC UFP Hamilton, LLC UFP Harrisonville, LLC UFP Hillsboro, LLC UFP International Employment Services, LLC UFP International, LLC Delaware 11032 Tidewater Trail, LLC Delaware 234 Springs Rd., LLC Delaware 2875 Needmore Rd. LLC 621 Hall St., LLC Delaware Aljoma Holding Company, LLC Michigan Aljoma Lumber, Inc. Ardellis Insurance Ltd. CA Truss, Inc. Caliper Building Systems, LLC Eovations, LLC Gulf Coast Components, LLC Horizon Terra, Incorporated Idaho Western, Inc. idX (China) Display System Co., Ltd. idX (India) Display Private Ltd. idX Asia Fixtures Limited idX Asia Trading Limited idX Chicago, LLC idX Corporation idX Corporation London Limited England and Wales ltd. Corp. UFP Mexico Embalaje y Distribution, S. de R.L. UFP Janesville, LLC UFP Kyle, LLC UFP Lafayette, LLC UFP Lansing, LLC UFP Magna, LLC UFP McMinnville, LLC Florida Bermuda Michigan Michigan Michigan Michigan Indiana Idaho China India Hong Kong Hong Kong Delaware Delaware idX Dallas, LLC idX Dayton, LLC idX Holdings, Inc. idX Impressions, LLC idX Los Angeles, LLC idX Mexico, S. de R.L. de C.V. idX Shanghai Trading Company, Ltd. Integra International Pty Ltd Integra Packaging Pty Ltd Landura, LLC Maine Ornamental, LLC Metaworld Technologies, LLC Mid-Atlantic Framing, LLC North Atlantic Framing, LLC Pacific Coast Showcase, Inc. Pinelli Universal TKT, S de R.L. de C.V. Pinelli Universal, S de R.L. de C.V. PR Distribution, LLC Shawnlee Construction, L.L.C. Shepardville Construction, LLC Store Fixtures Canada Holdings, Inc. The UBEECO Group Pty Ltd TKT Real State, S. de R.L. de C.V. Tresstar, LLC Triangle Systems, Inc. U.F.P. Mexico Holdings, S. de R.L.de CV UFP Albuquerque, LLC UFP Altoona, LLC UFP Ashburn, LLC UFP Atlantic Division, LLC UFP Atlantic, LLC UFP Auburndale, LLC Delaware Delaware Delaware Delaware Delaware Mexico China Australia Australia Texas Michigan Michigan Michigan Michigan Washington de C. V. UFP Mexico Investment, LLC UFP Mid-Atlantic, LLC UFP Minneota, LLC UFP Morristown, LLC UFP Moultrie, LLC UFP Mountain West, LLC UFP Nappanee, LLC UFP National Enterprises II, Inc. UFP New London, LLC UFP New Waverly, LLC UFP New Windsor, LLC UFP New York, LLC UFP North Atlantic, LLC UFP Northeast, LLC UFP Orlando, LLC Mexico UFP Parker, LLC Mexico Puerto Rico Michigan Michigan Delaware Australia Mexico Michigan New York Mexico Michigan Michigan Michigan Michigan Michigan Michigan UFP Purchasing, Inc. UFP Ranson, LLC UFP Real Estate, LLC UFP Riverside, LLC UFP Rockwell, LLC UFP Saginaw, LLC UFP Salisbury, LLC UFP San Antonio, LLC UFP Sauk Rapids, LLC UFP Schertz, LLC UFP Shawnee, LLC UFP Southeast, LLC UFP Southwest, LLC UFP Stockertown, LLC UFP Tampa, LLC UFP Thomaston, LLC EXHIBIT 21 Michigan United Kingdom Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Mexico Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan  Michigan UFP Aurora, LLC Australia UFP Australia Pty Ltd UFP Australia Real Estate Pty Ltd Australia Michigan UFP Barnesville, LLC Michigan UFP Belchertown, LLC Michigan UFP Berlin, LLC Michigan UFP Biscoe, LLC Michigan UFP Blanchester, LLC Michigan UFP Caldwell, LLC Canada UFP Canada, Inc. Michigan UFP Central Plains, LLC Michigan UFP Chandler, LLC Michigan UFP Chicago, LLC Michigan UFP Dallas, LLC Michigan UFP Distribution, LLC Michigan UFP Eagan, LLC Michigan UFP East Central, LLC Michigan UFP Eastern Division, Inc. UFP Eatonton, LLC UFP Elizabeth City, LLC UFP Elkwood, LLC UFP Far West, LLC UFP Folkston, LLC UFP Franklinton, LLC UFP Gainesville, LLC Michigan Michigan Michigan Michigan Michigan Michigan Michigan UFP Thornton, LLC UFP Transportation, Inc. UFP Union City, LLC UFP Ventures II, Inc. UFP Warranty Corporation UFP Warrens, LLC UFP Washington, LLC UFP Western Division, Inc. UFP White Bear Lake, LLC UFP Windsor, LLC UFP Woodburn, LLC United Lumber & Reman, LLC Universal Consumer Products, Inc. Universal Forest Products RMS, LLC Universal Forest Products Texas LLC Universal Forest Products, Inc. Universal Showcase ULC Upshur Forest Products, LLC Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Alabama Michigan Michigan Michigan Michigan Alberta Michigan Western Building Professionals of California II Limited Partnership Michigan Western Building Professionals of California, Inc. Michigan Michigan Western Building Professionals, LLC Michigan Yard & Home, LLC Texas Pinelli Lumber, Inc. TIBASA Universal Forest Products S. de R.L. de C.V. idX Amsterdam B.V. Mexico Amsterdam Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in Registration Statement Form S-8 for various employee option and incentive stock plans (Registration Statement Nos. 33-81128, 333-60630, 333-150345, 333-156596, and 33-84632) of our reports dated February 28, 2018, relating to the consolidated financial statements of Universal Forest Products, Inc. and subsidiaries (the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 30, 2017. Exhibit 23 /s/ Deloitte & Touche LLP Grand Rapids, Michigan February 28, 2018 Universal Forest Products, Inc. Certification Exhibit 31(a) I, Matthew J. Missad, 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 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: February 28, 2018 /s/ Matthew J. Missad Matthew J. Missad Chief Executive Officer and Principal Executive Officer Universal Forest Products, Inc. Certification Exhibit 31(b) 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 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: February 28, 2018 /s/ Michael R. Cole Michael R. Cole Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER OF UNIVERSAL FOREST PRODUCTS, INC. Exhibit 32(a) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350): I, Matthew J. Missad, 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 30, 2017, 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 30, 2017 fairly presents, in all material respects, the financial condition and results of operations of Universal Forest Products, Inc. Date: February 28, 2018 UNIVERSAL FOREST PRODUCTS, INC. By: /s/ Matthew J. Missad Matthew J. Missad Its: Chief Executive Officer and Principal Executive Officer The signed original of this written statement required by Section 906, or any other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Universal Forest Products, Inc. and will be retained by Universal Forest Products, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATE OF THE CHIEF FINANCIAL OFFICER OF UNIVERSAL FOREST PRODUCTS, INC. Exhibit 32(b) 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 30, 2017, 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 30, 2017 fairly presents, in all material respects, the financial condition and results of operations of Universal Forest Products, Inc. Date: February 28, 2018 UNIVERSAL FOREST PRODUCTS, INC. By: /s/ Michael R. Cole Michael R. Cole Its: Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer The signed original of this written statement required by Section 906, or any other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Universal Forest Products, Inc. and will be retained by Universal Forest Products, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 

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