<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 26, 1994
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8210
------
PAYLESS CASHWAYS, INC.
(Exact name of registrant as specified in its charter)
Iowa 42-0945849
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Pershing Square
2300 Main, P.O. Box 419466
Kansas City, Missouri 64141-0466
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 234-6000
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES / X / NO / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value, outstanding as of March 10, 1994:
Voting -- 37,524,136 shares
Class A Non-Voting -- 2,250,000 shares
<PAGE> 2
PAYLESS CASHWAYS, INC. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (1)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------------------------
February 26, February 27,
1994 1993
------------ ------------
<S> <C> <C>
Income
Net sales $ 542,053 $ 492,843
Other income 1,256 1,272
------------ ------------
543,309 494,115
Costs and Expenses
Cost of merchandise sold 375,281 336,262
Selling, general and administrative 137,882 130,303
Provision for depreciation
and amortization 14,298 13,663
Interest 16,605 37,891
------------ ------------
544,066 518,119
------------ ------------
LOSS BEFORE INCOME TAXES (757) (24,004)
Federal and state income taxes (76) (2,760)
------------ ------------
NET LOSS $ (681) $ (21,244)
============ ============
Net loss per common share (3) $ (.05) $ (3.41)
============ ============
Weighted average common shares outstanding 39,628 6,571
============ ============
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE> 3
PAYLESS CASHWAYS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (1)
(In thousands)
<TABLE>
<CAPTION>
February 26, November 27, February 27,
1994 1993 1993
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 11,510 $ 3,673 $ 7,003
Trade receivables 7,800 9,890 7,364
Merchandise inventories (2) 419,869 382,403 395,529
Prepaid expenses and other
current assets 19,813 17,056 10,633
Deferred income taxes 8,977 9,797 4,745
------------ ------------ ------------
TOTAL CURRENT ASSETS 467,969 422,819 425,274
OTHER ASSETS
Real estate held for sale 8,185 7,149 10,149
Cost in excess of net assets
acquired, less accumulated
amortization of $72,593,
$69,339 and $59,576,
respectively 448,073 451,327 461,090
Deferred financing costs 25,476 26,326 24,649
Other 10,647 8,861 8,241
LAND, BUILDINGS AND EQUIPMENT 756,234 749,115 711,953
Allowance for depreciation and
amortization (221,838) (211,999) (182,873)
------------ ------------ ------------
534,396 537,116 529,080
------------ ------------ ------------
$ 1,494,746 $ 1,453,598 $ 1,458,483
============ ============ ============
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE> 4
PAYLESS CASHWAYS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (1) (Cont'd.)
(In thousands)
<TABLE>
<CAPTION>
February 26, November 27, February 27,
1994 1993 1993
------------ ------------ ------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Advances under bank facilities $ 60,000 $ 5,000 $ 30,000
Current portion of long-term debt 54,962 55,978 48,908
Trade accounts payable 141,731 145,265 145,807
Other current liabilities 112,050 116,293 117,452
Income taxes payable 11,025 15,141 14,647
------------ ------------ ------------
TOTAL CURRENT LIABILITIES 379,768 337,677 356,814
LONG-TERM DEBT, less portion
classified as current liability (4) 636,467 640,127 997,142
NONCURRENT LIABILITIES
Deferred income taxes 65,572 64,624 66,011
Other 23,549 23,859 24,561
SHAREHOLDERS' EQUITY (5)
Preferred Stock, $1.00 par value,
25,000,000 shares authorized; issued:
Series A Cumulative Convertible
Preferred Stock, 406,000
shares at redemption value 40,600 40,600 40,600
Common Stock, $.01 par value:
Voting, 150,000,000 shares authorized,
37,491,492, 36,161,771, and 3,718,584
shares issued 375 361 37
Class A Non-Voting, 5,000,000 shares
authorized, 2,250,000 shares issued 23 23 23
Class B Non-Voting, 5,000,000 shares
authorized, 0, 1,125,000 and 1,125,000
shares issued -- 11 11
Additional paid-in capital 485,332 482,575 94,628
Retained deficit (136,940) (136,259) (121,344)
------------ ------------ -------------
TOTAL SHAREHOLDERS' EQUITY 389,390 387,311 13,955
------------ ------------ -------------
$ 1,494,746 $ 1,453,598 $ 1,458,483
============ ============ =============
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE> 5
PAYLESS CASHWAYS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (1)
(In thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
----------------------------------------
February 26, February 27,
1994 1993
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss $ (681) $ (21,244)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 14,298 13,663
Noncash interest 1,004 15,366
Deferred income taxes 1,769 (2,986)
Other 978 (97)
Changes in assets and liabilities (50,027) (11,125)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (32,659) (6,423)
Cash Flows from Investing Activities
Additions to land, buildings and equipment (8,867) (7,581)
Proceeds from sale of land, buildings and equipment 538 14
Increase in other assets (2,817) (952)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (11,146) (8,519)
Cash Flows from Financing Activities
Retirements of long-term debt (4,676) (38,882)
Increase in short-term borrowings 55,000 30,000
Sale of Common Stock under stock option plan 1,670 --
Sale of Common Stock under warrants 89 --
Other (441) (88)
------------ ------------
NET CASH PROVIDED BY (USED IN)
IN FINANCING ACTIVITIES 51,642 (8,970)
------------ ------------
Net increase in cash and cash equivalents 7,837 (23,912)
Cash and cash equivalents, beginning of period 3,673 30,915
------------ ------------
Cash and cash equivalents, end of period $ 11,510 $ 7,003
============ ============
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE> 6
PAYLESS CASHWAYS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Thirteen weeks ended February 26, 1994 and February 27, 1993.
(1) The accompanying condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q. To the extent
that information and footnotes required by generally accepted accounting
principles for complete financial statements are contained in or
consistent with the audited consolidated financial statements incorporated
by reference in the Company's Form 10-K for the year ended November 27,
1993, such information and footnotes have not been duplicated herein. In
the opinion of management, all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation of financial
statements have been reflected herein. The November 27, 1993, condensed
consolidated balance sheet has been derived from the audited consolidated
financial statements as of that date.
(2) Approximately 79% of the Company's inventories are valued using the LIFO
(last-in, first-out) method. Because inventory determination under the
LIFO method is only made at the end of each fiscal year based on the
inventory levels and costs at that time, interim LIFO determinations must
necessarily be based on management's estimates of expected year-end
inventory levels and costs. Since future estimates of inventory levels and
costs are subject to change, interim financial results reflect the
Company's most recent estimate of the effect of inflation and are subject
to final year-end LIFO inventory amounts. If the FIFO (first-in,
first-out) method of inventory accounting had been used by the Company,
inventories would have been $21.3 million, $20.2 million and $19.3 million
higher than reported at February 26, 1994, November 27, 1993, and February
27, 1993, respectively.
(3) Net loss per common share has been computed based on the weighted average
number of common shares outstanding during the period plus common stock
equivalents, when dilutive, consisting of shares subject to puts and
calls, certain stock options and warrants. For purposes of this
computation, net loss was adjusted for dividend requirements on preferred
stock, changes in the redemption value of both common stock subject to
puts and calls and warrants subject to puts (prior to March 15, 1993), and
interest expense reduction (net of tax) applicable to the exercise of
warrants and stock options, when these items were dilutive. Additional
shares of common stock issuable upon the conversion of convertible
preferred stock (which is not a common stock equivalent) and the exercise
of performance-based stock options have been considered only when the
impact is dilutive.
(4) Long-term debt consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
February 26, November 27, February 27,
1994 1993 1993
------------ ------------ ------------
<S> <C> <C> <C>
1993 Credit Agreement $ 325,000 $ 325,000 $ --
1988 Credit Agreement -- -- 145,808
Mortgage loan payable to insurance company 164,815 168,072 226,641
Senior subordinated notes - 9 1/8% 200,000 200,000 --
Senior subordinated debentures - 14 1/2% -- -- 317,868
Junior subordinated debentures - 16 1/2% -- -- 351,953
Other senior debt 1,614 3,033 3,780
------------ ------------ ------------
691,429 696,105 1,046,050
Less portion classified as current liability (54,962) (55,978) (48,908)
------------ ------------ ------------
$ 636,467 $ 640,127 $ 997,142
============ ============ ============
</TABLE>
<PAGE> 7
PAYLESS CASHWAYS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
Thirteen weeks ended February 26, 1994 and February 27, 1993.
(5) During fiscal 1993, the Company completed a recapitalization plan (the
"Recapitalization Plan") consisting of a series of transactions which were
designed to increase shareholders' equity, reduce the Company's debt and
interest expense, improve the Company's access to capital markets and
improve the Company's operating and financial flexibility. The
transactions included (i) the initial public offering of 32,200,000 shares
of Common Stock, which was completed on March 15, 1993 for net proceeds of
$385.4 million, (ii) the repayment on March 15, 1993 of $175.8 million of
indebtedness outstanding under the Company's previously existing bank
credit agreement, (iii) the prepayment on March 16, 1993 of $50 million of
indebtedness outstanding under the Company's $226.6 million mortgage loan
payable to an insurance company, (iv) the issuance of 9 1/8% senior
subordinated notes due 2003, which was completed on April 20, 1993 for the
aggregate principal amount of $200 million, (v) the repurchase on April 15
and 16, 1993 of $99.9 million aggregate principal amount of the Company's
16 1/2% junior subordinated debentures due August 1, 2008 and the
redemption of the remaining $291.1 million aggregate principal amount of
the junior subordinated debentures on July 30, 1993, (vi) borrowings on
November 1, 1993 of $325 million under an amended and restated bank credit
agreement entered into by the Company and certain banks, the 1993 Credit
Agreement, and (vii) the redemption on November 1, 1993 of $332.5 million
aggregate principal amount of the Company's 14 1/2% senior subordinated
debentures due November 1, 2000. The 1993 Credit Agreement also provides
for a revolving credit facility of $85 million which was used to provide a
portion of the funds necessary to complete the Recapitalization Plan and
which has been and will continue to be used to finance the working capital
requirements of the Company in the ordinary course of business.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
Sales
Net sales for the quarter ended February 26, 1994 increased 10.0% over the same
period of 1993 in total and 9.1% on a comparable-store sales basis. (Comparable
stores are those open one full year.) The positive sales comparisons reflect
mild weather conditions in many of the Company's markets in December and January
and an increase in the growth in business from both do-it-yourself and
professional customers. One new store opened in late March, 1993 and another in
late January, 1994.
Costs and Expenses
Cost of merchandise sold as a percent of sales was 69.2% and 68.2% for the first
quarter of 1994 and 1993, respectively. The increase in the first quarter of
1994 was due primarily to the growth in sales to the professional customer whose
merchandise purchases include a higher percentage of commodity goods at margin
rates somewhat lower than the Company average and lower realized margins on
lumber products.
Selling, general and administrative expenses were 25.4% and 26.4% of sales for
the first quarter of 1994 and 1993, respectively. The decrease in selling,
general and administrative expenses as a percentage of sales was primarily due
to lower personnel expenses and reduced advertising expense.
The provision for depreciation and amortization increased over the first quarter
of 1993 due to higher capital expenditures in fiscal 1993. The completion of
the Recapitalization Plan increased the Company's funds available for capital
expenditures.
Interest expense for the first quarter of 1994 decreased to $16.6 million
compared to $37.9 million for the same period of 1993 due primarily to the
retirement of long-term debt in connection with the Recapitalization Plan.
The provision for income taxes for the first quarter of 1994 was $.1 million
compared to $2.8 million for 1993. The effective tax rates for both periods
were different from the 35% statutory rate primarily due to the effect of
goodwill amortization, which is nondeductible for income tax purposes.
<PAGE> 8
PAYLESS CASHWAYS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS - Continued
RESULTS OF OPERATIONS - Continued
Net Loss
Net loss for the quarter ended February 26, 1994 was $.7 million compared to net
loss of $21.2 million for the same period of 1993. The decrease in the net loss
was primarily the result of the decreased interest expense discussed above.
During 1993, the Company completed the Recapitalization Plan consisting of a
series of transactions, which were designed to increase shareholders' equity,
reduce the Company's debt and interest expense, improve the Company's access to
capital markets and improve the Company's operating and financial flexibility.
The following table presents summary unaudited historical consolidated operating
data of the Company for the thirteen weeks ended February 26, 1994 and summary
unaudited pro forma consolidated operating data of the Company ("Pro Forma
Data") for the thirteen weeks ended February 27, 1993 which gives effect to the
Recapitalization Plan as if it had occurred at the beginning of fiscal 1993.
The Pro Forma Data is based upon available information and certain assumptions
that management believes are reasonable. The Pro Forma Data does not purport to
represent what the Company's results of operations would actually have been if
the transactions had occurred at the beginning of fiscal 1993 or to project the
Company's results of operations for any future period.
<TABLE>
<CAPTION>
Historical Pro Forma Data
-------------------- --------------------
Thirteen Thirteen
Weeks Ended Weeks Ended
February 26, 1994 February 27,1993
-------------------- --------------------
<S> <C> <C>
Net sales and other income $ 543,309 $ 494,115
Interest expense 16,605 18,261
Income (loss) before income taxes (757) (4,374)
Net income (loss) (681) (3,949)
Net income (loss) per common share $ (.05) $ (.13)
Weighted average common and
common equivalent shares outstanding 40,844 40,240
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash is from operations. Cash used in
operating activities was $32.7 million for the first quarter of 1994 compared to
$6.4 million for the same period of 1993. The increase in cash flow used in
operations is primarily attributable to an increase in inventory. Due to
seasonally lower sales in the winter months, cash flow in the first quarter
represents a small amount of annual operating cash flow.
Borrowings are available under a revolving credit facility to supplement cash
generated by operations. At February 26, 1994, $13.7 million was available for
borrowing under the revolving credit facility. At February 26, 1994, working
capital was $88.2 million compared to $85.1 million and $68.5 million at
November 27, 1993 and February 27, 1993, respectively. The current ratios at
February 26, 1994, November 27, 1993, and February 27, 1993 were 1.23 to 1, 1.25
to 1 and 1.19 to 1, respectively.
<PAGE> 9
PAYLESS CASHWAYS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS - Continued
LIQUIDITY AND CAPITAL RESOURCES - Continued
The Company's primary investing activities continue to be capital expenditures
for existing and new stores and distribution centers. The 1993 Credit Agreement
governs the amount of capital expenditures which can be made. The Company spent
approximately $8.8 million and $7.6 million for new stores, equipment and
renovation of retail facilities and distribution centers during the first
quarter of 1994 and 1993, respectively. In the first quarter of 1994, a new
store was opened. The Company intends to finance the remaining fiscal 1994
budgeted capital expenditures of approximately $61 million consisting primarily
of six new stores, a replacement store, additional equipment, and renovation of
existing stores with funds generated from operations.
The Company's most significant financing activity is and will continue to be the
retirement of indebtedness. Although the Company's consolidated indebtedness
is and will continue to be substantial, management believes that, based upon its
analysis of the Company's financial condition, the cash flow generated from
operations during the past 12 months and the expected results of operations in
the future, cash flow from operations and borrowings under the revolving credit
facility should provide sufficient liquidity to meet all cash requirements for
the next 12 months without additional borrowings.
<PAGE> 10
PAYLESS CASHWAYS, INC. AND SUBSIDIARY
REVIEW BY INDEPENDENT AUDITORS
The condensed consolidated financial statements of Payless Cashways, Inc. and
its subsidiary for the quarters ended February 26, 1994 and February 27,
1993, have been reviewed by KPMG Peat Marwick, independent auditors. Their
report is included in this filing.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
4.0 Long-term debt instruments of Payless in amounts not
exceeding ten percent (10%) of the total assets of
Payless and its subsidiaries on a consolidated basis
will be furnished to the Commission upon request.
4.1 Amended By-Laws of the Company.
11.1 Computation of per share earnings.
15.1 Letter re unaudited financial information - KPMG Peat
Marwick.
b. Reports on Form 8-K.
No reports on Form 8-K were filed by Payless during the quarter
ended February 26, 1994.
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAYLESS CASHWAYS, INC.
(Registrant)
Date: March 14, 1994 By s/Stephen A. Lightstone
---------------------------
Stephen A. Lightstone,
Senior Vice President,
Finance and Chief Financial
Office (Principal Financial
Officer and Principal
Accounting Officer)
<PAGE> 1
Exhibit 4.1
BY-LAWS
OF
PAYLESS CASHWAYS, INC.
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS -- Annual meetings of shareholders for the
election of directors, and for such other business as may be stated in the
notice of the meeting, shall be held at such place, either within or without the
state of incorporation of the Corporation, and at such time and date as the
board of directors, by resolution, shall determine and as set forth in the
notice of the meeting. If the board of directors fails so to determine the
time, date and place of meeting, the annual meeting of shareholders shall be
held at the principal office of the Corporation on the first Tuesday in April.
If the date of the annual meeting shall fall upon a legal holiday, the meeting
shall be held on the next succeeding business day. At each annual meeting, the
shareholders entitled to vote shall elect a board of directors and they may
transact such other corporate business as shall be stated in the notice of the
meeting.
SECTION 2. SPECIAL MEETINGS -- Special meetings of the shareholders for
any purpose or purposes may be called by the Chairman, Vice Chairman or
President or by resolution of the board of directors.
SECTION 3. NOTICE OF MEETINGS -- Written notice, stating the place, date
and time of the meeting, and the general nature of the business to be
considered, shall be given to each shareholder entitled to vote thereat at the
address as it appears on the records of the Corporation, not less than 10 nor
more than 60 days before the date of the meeting.
ARTICLE II
DIRECTORS
SECTION 1. NUMBER AND TERM -- The number of directors shall be no less
than nine and no more than twelve, as determined from time to time by resolution
adopted by the affirmative vote of a majority of the entire board of directors.
SECTION 2. RESIGNATIONS; VACANCIES -- Any director may resign at any time.
Such resignation shall be made in writing, and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the Corporation. The acceptance of a resignation shall not be necessary to make
it effective. Any vacancy occurring in the board of directors may be filled by
the affirmative vote of a majority of the remaining directors though less than a
quorum of the board of directors. Any directorship to be filled by reason of an
increase in the number of directors may be filled by the board of directors for
a term of office continuing only until the next election of directors by the
shareholders.
<PAGE> 2
SECTION 3. POWERS -- The board of directors shall exercise all of the
powers of the Corporation except such as are by law, or by the Articles of
Incorporation of the Corporation or by these By-Laws, conferred upon or reserved
to the shareholders.
SECTION 4. COMMITTEES -- The board of directors may designate one or more
committees, each committee to consist of two or more directors of the
Corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee.
Any committee established in accordance with this Section 4 or the Articles
of Incorporation, shall have and may exercise, to the extent permitted by the
Articles of Incorporation and provided in either a resolution of the board of
directors or these By-Laws, all the powers and authority of the board of
directors in the management of the business and affairs of the Corporation, but
no such committee shall have authority to (a) authorize distributions, (b)
approve or propose shareholder action or proposals required by law to be
approved by shareholders, (c) fill vacancies on the board of directors or on any
of its committees, (d) amend the articles of incorporation or adopt, amend or
repeal the bylaws, (e) approve a plan of merger not requiring shareholder
approval, (f) authorize or approve reacquisition of shares, except according to
a formula or method prescribed by the board of directors, and (g) authorize or
approve the issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences, and limitations of a class or
series of shares, except that the board of directors may authorize a committee
or a senior executive officer of the corporation to do so within limits
specifically prescribed by the board of directors.
SECTION 5. MEETINGS -- Regular meetings of the directors may be held
without notice at such places and times as shall be determined from time to time
by resolution of the directors.
Special meetings of the board may be called by the Chairman, Vice Chairman,
President or by the Secretary on the written request of any director on at least
two days' notice to each director (except that notice to any director may be
waived by attendance or in writing by such director) and shall be held at such
place or places as may be determined by the directors, or as shall be stated in
the call of the meeting.
SECTION 6. QUORUM -- A majority of the directors shall constitute a quorum
for the transaction of business. If at any meeting of the board there shall be
less than a quorum present, a majority of those present may adjourn the meeting
from time to time until a quorum is obtained, and no further notice thereof need
be given other than by announcement at the meeting which shall be so adjourned.
The vote of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the board of directors unless the Articles of
Incorporation or these By-Laws shall require the vote of a greater number.
SECTION 7. ACTION WITHOUT MEETING -- Any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if a written consent thereto is signed by all
members of the board or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the board or such committee.
<PAGE> 3
ARTICLE III
OFFICERS
SECTION 1. OFFICERS -- The officers of the corporation shall be a Chairman
of the Board, a Chief Executive Officer, a Vice Chairman of the Board, a
President, one or more Vice Presidents, a Treasurer and a Secretary, all of whom
shall be elected by the board of directors and shall hold office until their
successors are elected and qualified. In addition, the board of directors may
elect such Assistant Secretaries and Assistant Treasurers as they may deem
proper. The board of directors may appoint such other officers and agents as it
may deem advisable, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the board of directors.
SECTION 2. CHAIRMAN -- The Chairman of the Board shall preside at all
meetings of the board of directors and shall have and perform such other duties
as may be assigned by the board of directors.
SECTION 3. VICE CHAIRMAN OF THE BOARD -- The Vice Chairman of the Board
shall, at the request of the Chairman of the Board, or in the case of the
Chairman's absence, perform temporarily the functions of the Chairman of the
Board and shall perform such duties as may be assigned by the Chairman of the
Board or by the board.
SECTION 4. CHIEF EXECUTIVE OFFICER -- The Chief Executive Officer shall
have general charge and management of the business of this Corporation, shall
carry out such duties as are delegated by the board; shall see that all orders
and resolutions of the board are carried out, shall have power to execute all
contracts and agreements authorized by the board, shall make reports to the
board of directors and shareholders, and shall perform such other duties as are
incident to the office or are properly required by the board of directors. The
Chief Executive Officer shall be responsible for the direction and supervision
of all personnel within his appointive powers and shall also have the power to
discipline or discharge such personnel. The Chief Executive Officer shall sit
with the board of directors in deliberation upon all matters pertaining to the
general business and policies of the Corporation.
SECTION 5. PRESIDENT -- The President shall have the general powers and
duties of supervision and management usually vested in the office of President
of a corporation. Except as the board of directors shall authorize execution
thereof in some other manner, the President shall execute bonds, mortgages and
other contracts on behalf of the Corporation.
SECTION 6. VICE PRESIDENT -- Each Vice President shall have such powers
and shall perform such duties as shall be assigned to him by the board of
directors.
SECTION 7. TREASURER -- The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation, shall deposit
all moneys and other valuables in the name and to the credit of the Corporation
in such depositaries as may be designated by the board of directors, shall
disburse the funds of the Corporation as may be ordered by the board of
directors,
<PAGE> 4
or the Chairman, Chief Executive Officer, Vice Chairman or President, taking
proper vouchers for such disbursement, and shall render to the board of
directors at the regular meetings of the board of directors, or whenever they
may request it, an account of all transactions as Treasurer and of the financial
condition of the Corporation. If required by the board of directors, the
Treasurer shall give the Corporation a bond for the faithful discharge of the
Treasurer's duties in such amount and with such surety as the board shall
prescribe.
SECTION 8. SECRETARY -- The Secretary shall give, or cause to be given,
notice of all meetings of shareholders and directors and all other notices
required by law or by these By-Laws, and in case of the absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the Chairman, Chief Executive Officer, Vice Chairman or President, or by the
directors, or shareholders, upon whose request the meeting is called as provided
in these By-Laws. The Secretary shall record all the proceedings of the
meetings of the board of directors, any committees thereof and the shareholders
of the Corporation in a book to be kept for that purpose, and shall perform such
other duties as may be assigned by the board of directors or the Corporation.
SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES -- Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the board of directors.
ARTICLE IV
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK -- A certificate of stock shall be issued
to each shareholder certifying the number of shares owned by such shareholder in
the Corporation.
SECTION 2. LOST CERTIFICATES -- A new certificate of stock may be issued
in the place of any certificate theretofore issued by the Corporation, alleged
to have been lost or destroyed, and the board of directors may, in its
discretion, require the owner of the lost or destroyed certificate, or such
owner's legal representatives, to give the Corporation a bond, in such sum as
they may direct, not exceeding double the value of the stock, to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss of any such certificate, or the issuance of any such new
certificate.
SECTION 3. TRANSFER OF SHARES -- The shares of stock of the Corporation
shall be transferrable only upon its books by the holders thereof in person or
by their duly authorized attorneys or legal representatives, and upon such
transfer the old certificates shall be surrendered to the Corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the board of directors may designate, by
whom they shall be cancelled, and new certificates shall thereupon be issued. A
record shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. SHAREHOLDERS RECORD DATE -- In order that the Corporation may
<PAGE> 5
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful actions, the board of directors may fix, in
advance, a record date, which shall not be more than 70 nor less than 10 days
before the date of such meeting, nor more than 70 days prior to any other
action. A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
SECTION 5. FISCAL YEAR -- The fiscal year of the Corporation shall be
determined by resolution of the board of directors. In absence of a resolution
by the board of directors, the fiscal year of the Corporation shall end on the
last Saturday in the month of November.
SECTION 6. CHECKS -- All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers, agent or agents of the
Corporation, and in such manner as shall be determined from time to time by
resolution of the board of directors.
<PAGE> 1
Exhibit 11.1
PAYLESS CASHWAYS, INC. AND SUBSIDIARY
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
------------------------------------------
February 26, February 27,
1994 1993
------------ ------------
<S> <C> <C>
PRIMARY
Net loss $ (681) $ (21,244)
Add (deduct):
Preferred stock dividends (1,239) (1,145)
Net loss available to
common shareholders $ (1,920) $ (22,389)
Weighted average common and
dilutive common equivalent
shares outstanding 39,628 6,571
Net loss per common share $ (.05) $ (3.41)
</TABLE>
<PAGE> 1
Exhibit 15.1
[Letterhead of KPMG Peat Marwick]
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Payless Cashways, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Payless Cashways, Inc. and subsidiary as of February 26, 1994 and the related
condensed consolidated statements of operations and cash flows for the thirteen
week period then ended. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accounts. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Payless Cashways, Inc. and
subsidiary as of November 27, 1993 and the related consolidated statements of
operations, shareholders' equity and cash flows for the fiscal year then ended
(not presented herein); and in our report dated January 7, 1994, we express an
unqualified opinion on those consolidated financial statements. Our report
referred to a change in the method of accounting for postretirement benefits
other than pensions in fiscal 1992. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of November 7, 1993
is fairly presented in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
s/KPMG Peat Marwick
Kansas City, Missouri
March 9, 1994
<PAGE> 2
[Letterhead of KPMG Peat Marwick]
Payless Cashways, Inc.
Kansas City, Missouri
Gentlemen:
With respect to the subject registration statements on Form S-8 and Form S-3, we
acknowledge our awareness of the use therein of our report dated March 9, 1994
related to our review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Securities Act.
s/KPMG Peat Marwick
Kansas City, Missouri
March 14, 1994
