<PAGE> 1
UNITED STATES 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 August 26, 1995
OR
/ / 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 September 15, 1995:
Voting -- 37,663,922 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 Thirty-Nine Weeks Ended
------------------------------------- ----------------------------------
August 26, August 27, August 26, August 27,
1995 1994 1995 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Income
Net sales $ 737,237 $ 744,112 $ 2,005,134 $ 2,020,380
Other income (7) 1,357 2,008 4,218 5,975
--------------- --------------- --------------- ---------------
738,594 746,120 2,009,352 2,026,355
Costs and expenses
Cost of merchandise sold 530,402 530,402 1,432,885 1,424,342
Selling, general and administrative 159,272 149,569 460,925 443,809
Provision for depreciation and amortization 15,567 15,116 45,339 43,979
Interest expense 15,247 16,348 46,093 49,416
--------------- --------------- --------------- ---------------
720,488 711,435 1,985,242 1,961,546
--------------- --------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 18,106 34,685 24,110 64,809
Federal and state income taxes 8,985 15,635 11,765 29,040
--------------- --------------- --------------- ---------------
Income before equity in loss of joint
venture and extraordinary item 9,121 19,050 12,345 35,769
Equity in loss of joint venture (5) (975) (705) (3,450) (1,149)
--------------- --------------- --------------- ---------------
Income before extraordinary item 8,146 18,345 8,895 34,620
Extraordinary item: early extinguishment
of debt (4) -- 288 -- 343
--------------- --------------- --------------- ---------------
NET INCOME $ 8,146 $ 18,633 $ 8,895 $ 34,963
=============== =============== =============== ===============
Income per common share before
extraordinary item $ .17 $ .42 $ .12 $ .76
Extraordinary item: early extinguishment
of debt (4) -- .01 -- .01
-- --- -- ---
Net income per common share (3) $ .17 $ .43 $ .12 $ .77
=============== =============== =============== ===============
Weighted average common and dilutive
common equivalent shares
outstanding 40,116 40,320 39,969 40,321
=============== =============== =============== ===============
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE> 3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (1)
<TABLE>
<CAPTION>
August 26, November 26, August 27,
(In thousands) 1995 1994 1994
------------- --------------- --------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,496 $ 2,680 $ 12,040
Trade receivables -- 5,127 6,524
Merchandise inventories (2) 406,808 406,066 406,738
Prepaid expenses and other current assets 27,444 26,448 28,840
Deferred income taxes 16,265 9,549 7,364
------------- --------------- --------------
TOTAL CURRENT ASSETS 455,013 449,870 461,506
OTHER ASSETS
Real estate held for sale 5,458 5,498 6,710
Cost in excess of net assets acquired, less
accumulated amortization of $92,118,
$82,355 and $79,101, respectively 428,548 438,311 441,565
Deferred financing costs 11,405 11,199 23,810
Other 23,785 17,706 14,728
LAND, BUILDINGS AND EQUIPMENT 847,952 810,825 790,230
Allowance for depreciation and amortization (261,041) (237,527) (234,767)
------------- --------------- --------------
TOTAL LAND, BUILDINGS AND EQUIPMENT 586,911 573,298 555,463
------------- --------------- --------------
$ 1,511,120 $ 1,495,882 $ 1,503,782S
============= =============== ==============
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued (Unaudited) (1)
<TABLE>
<CAPTION>
August 26, November 26, August 27,
(In thousands) 1995 1994 1994
------------- --------------- --------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 18,627 $ 20,269 $ 58,033
Advances under bank facilities -- -- 20,000
Trade accounts payable 160,178 151,059 152,634
Other current liabilities 136,362 128,031 131,372
Income taxes payable 22,280 11,383 17,988
------------- --------------- --------------
TOTAL CURRENT LIABILITIES 337,447 310,742 380,027
LONG-TERM DEBT, less portion
classified as current liability (4) 641,458 654,131 605,423
NON-CURRENT LIABILITIES
Deferred income taxes 65,810 72,129 68,765
Other 23,461 23,015 23,034
SHAREHOLDERS' EQUITY
Preferred Stock, $1.00 par value, 25,000,000
shares authorized; issued:
Cumulative Preferred Stock, 406,000 shares,
$71.2 million aggregate liquidation preference 40,600 40,600 40,600
Common Stock, $.01 par value:
Voting, 150,000,000 shares authorized,
37,663,922, 37,624,222, and 37,624,222
shares issued, respectively 377 376 376
Non-Voting Class A, 5,000,000 shares
authorized, 2,250,000 shares issued 23 23 23
Additional paid-in capital 487,008 486,326 486,830
Foreign currency translation adjustment (2,589) (90) --
Accumulated deficit (82,475) (91,370) (101,296)
------------- --------------- --------------
TOTAL SHAREHOLDERS' EQUITY 442,944 435,865 426,533
------------- --------------- --------------
COMMITMENTS (6)
$ 1,511,120 $ 1,495,882 $ 1,503,782
============= =============== ==============
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (1)
<TABLE>
<CAPTION>
(In thousands)
Thirty-Nine Weeks Ended
-----------------------------------------------------
August 26, August 27,
1995 1994
------------------ -----------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 8,895 $ 34,963
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 45,339 43,979
Non-cash interest 1,750 3,442
Gain on early extinguishment of debt -- (343)
Equity in loss of joint venture 3,450 1,149
Deferred income taxes (13,035) 6,574
Other 887 1,873
Changes in assets and liabilities 33,164 (7,841)
------------------ -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 80,450 83,796
Cash Flows from Investing Activities
Additions to land, buildings and equipment (53,726) 52,598)
Proceeds from sale of land, buildings and equipment 394 1,224
Investment in joint venture (9,254) (3,431)
Increase in other assets (19) (4,616)
------------------ -----------------
NET CASH USED IN INVESTING ACTIVITIES (62,605) (59,421)
Cash Flows from Financing Activities
Proceeds from long-term debt -- 21,307
Retirements of long-term debt (4) (14,315) (53,033)
Increase in short-term borrowings -- 15,000
Sale of Common Stock under stock option plan 16 2,517
Sale of Common Stock under warrants -- 89
Other (1,730) (1,888)
------------------ -----------------
NET CASH USED IN FINANCING ACTIVITIES (16,029) (16,008)
------------------ -----------------
Net increase in cash and cash equivalents 1,816 8,367
Cash and cash equivalents, beginning of period 2,680 3,673
------------------ -----------------
Cash and cash equivalents, end of period $ 4,496 $ 12,040
================== =================
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Thirty-nine weeks ended August 26, 1995 and August 27, 1994.
(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 26, 1994, 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 26, 1994, condensed consolidated balance sheet has been derived
from the audited consolidated financial statements as of that date.
Certain reclassifications have been made to prior period amounts to
conform with the 1995 presentation.
(2) Approximately 81% 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 $27.9 million, $23.3 million and $24.4
million higher than reported at August 26, 1995, November 26, 1994, and
August 27, 1994, respectively.
(3) Net income 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 certain stock options and
warrants. For purposes of this computation, net income was adjusted for
dividend requirements on preferred stock.
(4) Long-term debt consisted of the following:
<TABLE>
<CAPTION>
August 26, November 26, August 27,
(In thousands) 1995 1994 1994
------------- -------------- -------------
<S> <C> <C> <C>
1994 Credit Agreement $ 342,000 $ 345,000 $ --
1993 Credit Agreement -- -- 304,546
1994 Multi-Draw Credit Agreement -- -- 21,306
Mortgage loan payable to insurance company 142,949 154,195 158,025
Senior subordinated notes - 9-1/8% 173,655 173,655 178,000
Other senior debt 1,481 1,550 1,579
------------- -------------- -------------
660,085 674,400 663,456
Less portion classified as current liability (18,627) (20,269) (58,033)
------------- -------------- -------------
$ 641,458 $ 654,131 $ 605,423
============= ============== =============
</TABLE>
During the first quarter of 1995, the Company entered into an interest
rate cap with an affiliate of an investment banking firm, limiting to 8%
LIBOR the interest rates on $100 million of its floating rate debt. The
cost of this agreement is included in deferred financing costs and is
being amortized over the three-year period of the agreement.
As of August 27, 1994, the Company had borrowed $21.3 million under the
1994 Multi-Draw Credit Agreement to repurchase and retire $22 million
aggregate principal amount of 9-1/8% Senior Subordinated Notes, resulting
in an extraordinary gain of $0.3 million, net of tax, for the quarter
ended August 27, 1994.
(5) The Company is a 49% investor in Total Home de Mexico, S.A. de C.V., a
joint venture with a Mexican company, Alfa, S.A. de C.V. Total Home has
opened two stores in Mexico. The joint venture owners continue to assess
long-range plans as the next several quarters are expected to be
difficult for the Mexican economy. The Company accounts for this
investment on the equity method.
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(6) In 1995, the Company has entered into an agreement providing for the
operating lease of two of each of its 1994 and 1995 new stores, and up to
two 1996 new stores. The Company will have the option to purchase the
stores at the end of the lease terms. In the event the Company chooses
not to exercise this option, it is obligated to arrange the sale of the
stores to an unrelated party and is required to pay the lessor any
difference between the net sales proceeds and the lessor's net investment
in the stores, subject to certain limitations.
(7) In July, 1993, two of the Company's retail facilities were severely
damaged by the midwestern floods. Settlement proceeds in excess of the
book value of $2.8 million, related to the flood-damaged real estate,
fixtures and equipment, have been reflected as other income in the
accompanying consolidated statements of operations for the thirteen weeks
and the thirty-nine weeks ended August 27, 1994.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS
Income
Net sales for the quarter ended August 26, 1995 decreased 0.9% over the same
period of 1994 in total and 4.1% on a comparable-store sales basis. (Comparable
stores are those open one full year.) Net sales for the first three quarters of
1995 decreased 0.8% from the same period of 1994 in total and 3.6% on a
comparable store sales basis. Sales for both periods of 1995 were negatively
impacted by a slower housing environment, deflated lumber costs and, in a number
of markets, an excess of retail space devoted to the sale of building materials.
During each of the first three quarters of 1995 and 1994, the Company opened
five new stores. Two stores were sold during the first quarter of 1995.
Included in other income for the third quarter and first three quarters of 1994
were gains of $0.9 million and $2.8 million, respectively, from flood-related
settlements.
Costs and Expenses
Cost of merchandise sold as a percent of sales was 72.0% and 71.3% for the third
quarter of 1995 and 1994, respectively. For the first three quarters of 1995 and
1994, cost of merchandise sold as a percent of sales was 71.5% and 70.5%,
respectively. The increase for both periods was primarily due to the Company's
pricing initiatives.
Selling, general and administrative expenses were 21.6% and 20.1% of sales for
the third quarter of 1995 and 1994, respectively. For the first three quarters
of 1995 and 1994, selling, general and administrative expenses were 22.9% and
22.0% of sales, respectively. The primary reason for the dollar increase for the
quarter and the first three quarters was costs associated with new stores.
The provision for depreciation and amortization increased over the third quarter
and first three quarters of 1994 due to increased capital expenditures over the
past two years.
Interest expense for the third quarter and first three quarters of 1995
decreased to $15.2 million and $46.1 million compared to $16.3 million and $49.4
million, respectively, for the same periods of 1994.
The income tax expense for the first three quarters of 1995 was $11.8 million
compared to $29.0 million for the first three quarters of 1994. The effective
tax rates for both periods were different from the 35% statutory rate primarily
due to the effect of goodwill amortization, which is non-deductible for income
tax purposes.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS - Continued
Net Income
Net income for the quarter ended August 26, 1995 was $8.1 million compared to
$18.6 million for the same period of 1994. For the first three quarters of 1995
net income was $8.9 million compared to $35.0 million for the same period of
1994. The decrease in net income for both periods was primarily the result of
decreased comparable store sales and pricing initiatives. Net income for the
first three quarters of 1995 and 1994 also reflects a $3.5 million and $1.1
million loss, respectively, attributable to start-up costs for Total Home, the
Company's joint venture in Mexico.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash is from operations. Cash provided by
operating activities was $80.5 million for the first three quarters of 1995
compared to $83.8 million for the same period of 1994. The primary reason for
the decrease in cash from operating activities was lower sales and gross
margins.
Borrowings are available under the 1994 Credit Agreement to supplement cash
generated by operations. At August 26, 1995, $63.7 million was available for
borrowing under the 1994 Credit Agreement. At August 26, 1995, working capital
was $117.6 million compared to $139.1 million and $81.5 million at November 26,
1994 and August 27, 1994, respectively. The current ratios at August 26, 1995,
November 26, 1994, and August 27, 1994 were 1.35 to 1, 1.45 to 1, and 1.21 to 1,
respectively.
The Company's primary investing activities continue to be capital expenditures
for existing and new stores and distribution centers. The 1994 Credit Agreement
governs the amount of capital expenditures which can be made. The Company spent
approximately $53.7 million and $52.6 million for new stores, equipment and
renovation of retail facilities and distribution centers during the first three
quarters of 1995 and 1994, respectively. During each of the first three quarters
of 1995 and 1994, five new stores were opened. A sixth store has opened in the
fourth quarter of 1995. The Company intends to finance the remaining fiscal 1995
capital expenditures of approximately $12 million, consisting primarily of new
stores, additional equipment, and renovation of existing stores, with funds
generated from operations. The Company has entered into an agreement providing
for the operating lease of two of each of its 1994 and 1995 new stores and up to
two of its 1996 new stores.
The Company intends to make additional investments as a result of the completion
of a strategic review begun in the first quarter of 1995. Some of the expanded
assortment offered in the Company's newest stores will be added to other
selected stores which may increase the Company's average inventory by
approximately $10 million. It is also anticipated that some facilities will be
dedicated to the high volume professional and commercial accounts whose business
is not traditionally retail store-based. Based on current plans, these strategic
initiatives, to be tested during 1996, are expected to result in a 1996 capital
investment of approximately $10 million.
The Company also invested $9.3 million and $3.4 million in its joint venture,
Total Home de Mexico, S.A. de C.V., during the first three quarters of 1995 and
1994, respectively. Total Home opened its first store in Monterrey, Mexico, in
December, 1994 and a second store in Mexico City in June, 1995. A loss of $4 to
$5 million attributable to the Company's share of the start-up cost of Total
Home is expected to be incurred in 1995. The joint venture owners continue to
assess long-range plans as the next several quarters are expected to be
difficult for the Mexican economy. At August 26, 1995 the carrying value of the
Company's investment in the joint venture was approximately $7.8 million, net of
a cumulative foreign currency translation adjustment of approximately $2.6
million, which is recorded as a direct reduction of shareholders' equity. The
Company continues to assess the impact the changes in the Mexican economy may
have on the recoverability of its investment in the joint venture.
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 borrowing availability under the 1994
Credit Agreement should provide sufficient liquidity to meet all cash
requirements for the next 12 months without additional borrowings. During the
second quarter of 1995, the 1994 Credit Agreement was amended which resulted in
the modification of certain financial covenants contained therein. The permitted
levels of capital expenditures and investments in the Mexican joint venture were
reduced. In addition, the interest coverage and debt to capitalization covenants
were relaxed. As a result, the Company has reduced its planned fiscal 1995
capital expenditures from approximately $82.5 million to approximately $65 to
$70 million.
<PAGE> 9
REVIEW BY INDEPENDENT AUDITORS
The condensed consolidated financial statements of Payless Cashways, Inc. and
its subsidiary for the thirteen and thirty-nine week periods ended August 26,
1995 and August 27, 1994, have been reviewed by KPMG Peat Marwick LLP,
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 subsidiary on a consolidated basis will
be furnished to the Commission upon request.
11.1 Computation of per share earnings.
15.1 Letter re unaudited financial information - KPMG Peat
Marwick LLP.
27.1 Financial data schedule.
b. Reports on Form 8-K.
No reports on Form 8-K were filed by Payless during the quarter
ended August 26, 1995.
<PAGE> 10
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: September 26, 1995 By s/Stephen A. Lightstone
Stephen A. Lightstone, Senior Vice President,
Financial and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
<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 Thirty-Nine Weeks Ended
-------------------------------- --------------------------------
August 26, August 27, August 26, August 27,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PRIMARY
- -------
Net income before extraordinary item $ 8,146 $ 18,345 $ 8,895 $ 34,620
Less:
Preferred stock dividends (1,395) (1,289) (4,104) (3,792)
---------- ---------- ---------- ----------
Income before extraordinary item
available to common shareholders 6,751 17,056 4,791 30,828
Extraordinary item: early extinguishment of debt -- 288 -- 343
---------- ---------- ---------- ----------
Net income available to common shareholders $ 6,751 $ 17,344 $ 4,791 $ 31,171
---------- ---------- ---------- ----------
Weighted average common and dilutive common
equivalent shares outstanding 40,116 40,320 39,969 40,321
---------- ---------- ---------- ----------
Income per common share before
extraordinary item $ .17 $ .42 $ .12 $ .76
Extraordinary item per common share -- .01 -- .01
---------- ---------- ---------- ----------
Net income per common share $ .17 $ .43 $ .12 $ .77
========== ========== ========== ==========
FULLY DILUTED
- -------------
Net income before extraordinary item $ 8,146 $ 18,345 $ 8,895 $ 34,620
Less:
Preferred stock dividends (1,395) (1,289) (4,104) (3,792)
---------- ---------- ---------- ----------
Income before extraordinary item
available to common shareholders 6,751 17,056 4,791 30,828
Extraordinary item: early extinguishment of debt -- 288 -- 343
---------- ---------- ---------- ----------
Net income available to common shareholders $ 6,751 $ 17,344 $ 4,791 $ 31,171
---------- ---------- ---------- ----------
Weighted average common and dilutive common
equivalent shares outstanding 40,116 40,320 39,969 40,321
---------- ---------- ---------- ----------
Income per common share before
extraordinary item $ .17 $ .42 $ .12 $ .76
Extraordinary item per common share -- .01 -- .01
---------- ---------- ---------- ----------
Net income per common share $ .17 $ .43 $ .12 $ .77
========== ========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 15.1
- ------------
[Letterhead of KPMG Peat Marwick LLP]
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Payless Cashways, Inc.:
We have reviewed the accompanying condensed consolidated balance sheets of
Payless Cashways, Inc. and subsidiary as of August 26, 1995 and August 27,
1994 and the related condensed consolidated statements of operations for the
thirteen and thirty-nine week periods then ended and cash flows for the
thirty-nine week periods then ended. These condensed consolidated financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. 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 as opinion.
Based on our reviews, 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 26, 1994 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 9, 1995, we expressed
an unqualified opinion on those consolidated financial statements. Our
report referred to a change in the method of accounting for post-retirement
benefits other than pensions in fiscal 1992. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as of
November 26, 1994 is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
s/ KPMG Peat Marwick LLP
Kansas City, Missouri
September 12, 1995
<PAGE> 2
EXHIBIT 15.1
- ------------
[Letterhead of KPMG Peat Marwick LLP]
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 September
12, 1995 related to our review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1993, 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 LLP
Kansas City, Missouri
September 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the August
26, 1995, financial statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-25-1995
<PERIOD-END> AUG-26-1995
<CASH> 4496
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 406808
<CURRENT-ASSETS> 455013
<PP&E> 847952
<DEPRECIATION> (261041)
<TOTAL-ASSETS> 1511120
<CURRENT-LIABILITIES> 337447
<BONDS> 641458
<COMMON> 400
0
40600
<OTHER-SE> 401944
<TOTAL-LIABILITY-AND-EQUITY> 1511120
<SALES> 2005134
<TOTAL-REVENUES> 2009352
<CGS> 1432885
<TOTAL-COSTS> 1432885
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46093
<INCOME-PRETAX> 24110
<INCOME-TAX> 11765
<INCOME-CONTINUING> 8895
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8895
<EPS-PRIMARY> .12
<EPS-DILUTED> 0
</TABLE>
