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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
(Mark One)
   / X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES 
         EXCHANGE ACT OF 1934 [FEE REQUIRED]

                  For the fiscal year ended November 25, 1995
                                                             OR
  /    / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES 
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                  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

          SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:

                                                       Name of Each Exchange on
Title of Each Class                                         Which Registered
-------------------                                    -------------------------

Common Stock, $.01 par value                             New York Stock Exchange

9-1/8% Senior Subordinated Notes due April 15, 2003      New York Stock Exchange

       SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: NONE

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 by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / X /

The aggregate market value of the Common Stock, par value $.01 per share, of the
registrant held by  nonaffiliates  of the registrant as of February 2, 1996, was
$158,704,224.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

Common Stock, $.01 par value, outstanding as of February 2, 1996:

           Voting                    --      37,668,206  shares
           Class A Non-Voting        --       2,250,000  shares

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions  of the  Annual  Report  to  Shareholders  for the year  ended
November 25, 1995, are  incorporated  by reference into Part II. Portions of the
Annual Proxy  Statement for the Annual Meeting of  Shareholders to be held April
18, 1996, are incorporated by reference into Part III.



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                                    PART I
                                    ------


 Item 1.  BUSINESS.
 -------  ---------

GENERAL

       Payless Cashways, Inc. ("Payless" or the "Company") is the fourth largest
retailer  of  building  materials  and home  improvement  products in the United
States as measured by sales. The Company operates 200 full-line retail stores in
22 states located in the Midwest,  Southwest,  Pacific Coast, Rocky Mountain and
New England areas under the names of Payless Cashways Building Materials, Furrow
Building  Materials,  Lumberjack  Building  Materials,  Hugh M.  Woods  Building
Materials,  Knox Lumber and Somerville Lumber.  Each full-line store is designed
as a one-stop  source  that  provides  customers  with a complete  selection  of
quality products and services needed to build, improve, and maintain their home,
business,  farm  or  ranch  properties.  The  Company's  merchandise  assortment
currently  includes  approximately  26,000  items in the  following  categories:
lumber  and  building  materials,  millwork,  tools,  hardware,  electrical  and
plumbing products,  paint, lighting, home decor, kitchens,  decorative plumbing,
heating,  ventilating  and  cooling  (HVAC),  and  seasonal  items.  The Company
believes that the combination of a full-line lumberyard,  a broad product mix, a
high  level  of  in-store  customer  assistance  concerning  product  usage  and
installation,   and   competitive   prices   distinguishes   Payless  from  many
competitors.

       The   Company's    primary    customers    include    project    oriented
do-it-yourselfers   and   professionals.   Project  oriented   do-it-yourselfers
("DIY-ers")  are  those  that  engage in more  frequent  and  complex  repair or
improvement  projects and typically  spend in excess of $1,000  annually on home
improvement  products.  Professionals  ("Pros") include remodelers,  residential
contractors, and specialty tradesmen along with enterprises which purchase large
quantities  of building  materials  for facility  maintenance,  such as property
management   firms,   commercial   and  industrial   accounts,   and  government
institutions.  Due to its product mix (especially the advantage  provided by its
full-line  lumberyard) and customer service approach,  the Company believes that
it is well  positioned  to increase  its  penetration  of these  segments of the
building materials and home improvement products market. Payless also serves the
needs of the moderate and light DIY-er.


INDUSTRY OVERVIEW

       Building  materials  and home  improvement  products are sold through two
distribution  channels -- retail  units and  wholesale  supply  outlets.  In the
latest study prepared by DRI/McGraw-Hill in November 1995, the retail channel of
the industry was estimated to be $133.9  billion in 1995,  and is forecast to be
$169.2 billion by 2000. The Company  estimates the wholesale  supply channel for
products  sold by the Company  represented  approximately  $131 billion in 1995,
based on the most recently available  unpublished data from the U.S.  Department
of Commerce for 1995.

       Retail distribution  channels include neighborhood  hardware stores, home
centers,  warehouse stores, specialty stores (such as paint and tile stores) and
lumberyards.  Although  the  industry  remains  highly  fragmented,  the  retail
distribution   channel  has  consolidated   somewhat  in  the  last  ten  years,
particularly  in  metropolitan  areas.  Warehouse,   home  center  and  building
materials chains have grown while the number of local independent  merchants has
declined. The top 10 chains accounted for approximately 26% of industry sales in
1994.

       In   general   terms,   customers   can  be   characterized   as   either
retail-oriented  (consumer) or wholesale-oriented  (professional).  The consumer
segments,  as defined by the Company,  include light DIY-ers who spend less than
$200 annually on building  materials and home  improvements  products;  moderate
DIY-ers  who make  annual  purchases  of $200 to $1,000;  and  project  oriented
DIY-ers  who  make  annual   purchases   in  excess  of  $1,000.   Purchases  by
professionals  tend to be larger in volume and require  specialized  merchandise
assortments,  competitive  market pricing,  superior  lumber quality,  telephone
order placement, commercial credit and job-site delivery.


BUSINESS STRATEGY

       OBJECTIVES

       The Company's  principal  objectives  are to increase its market share in
the Pro and  project-oriented  DIY  segments  through its  existing  stores,  to
maintain  its  leadership  role in the  industry  and to continue to improve its
balance  sheet by  reducing  its debt.  Payless  Cashways  intends  to remain an
industry  leader  by  offering  DIY  customers  a  distinct  alternative  to the
warehouse  shopping  experience and by targeting the Pro business as the primary
source of growth.



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       The Company believes that demographic and lifestyle  factors (such as the
aging baby  boomers,  the  increase in  home-centered  activities  and the aging
housing  stock) will result in a growing  demand for its  products.  The Company
also believes that the rate of growth in the professional  segment will continue
to exceed the consumer or DIY segment due to the lack of  discretionary  time of
many homeowners and the reluctance of an aging homeowner population to engage in
major repair or remodeling  projects.  As a national chain, the Company believes
it enjoys economies of scale, buying power and professional  management that the
traditional  outlets  supplying  the  professional  commonly do not have.  These
advantages,  along with the broad product  assortment and full service  package,
make the Company well-suited to supply the professional's needs.

       Based on the  Company's  1995 customer data from a sample of stores which
the Company believes are  representative of its stores,  the Company's  business
mix  as  a  percentage  of  sales  was   approximately  50%  DIY  and  50%  Pro.
Approximately 66% of the DIY sales were derived from the project-oriented DIY-er
and the remainder from the light and medium DIY-er.

       PROFESSIONAL STRATEGY

       The  Company  is   particularly   well-suited   to  serve  the  needs  of
professional  customers  and  offers  services  not  provided  by  others in the
industry.

       A sales and service staff of approximately 1,800 are dedicated to serving
the professional  customer.  Professional  sales  representatives  have assigned
customers  for whom they provide  service  tailored to the  customers'  business
needs. Sales  representatives call on professional  customers at their places of
business and job sites.  The sales  representatives  have  detailed  information
regarding account purchases and the profitability of their accounts. The Company
believes that this level of customer service and type of sales management system
is effective in increasing  purchases and improving  profitability  from current
professional customers as well as building customer loyalty.

       Each  full-line  store  has a  separate  commercial  sales  area  for the
professional  customer to use. These offices allow private  discussions  between
the customer and their sales representative,  speed the purchase process for the
Pro and offer small amenities to these customers such as coffee,  ice, and phone
access. The Company has 94 drive-through  lumberyards which significantly reduce
the time required to complete a purchase and meet the Pros' requirement for fast
and efficient  service.  The Company plans to convert an additional 17 stores to
this drive-through format in 1996.

       The Company's  merchandise  assortment is  particularly  appealing to the
Pro.  Preferred brands,  commercial grade items,  contractor packs and extensive
special  order  capabilities  ensure  that the Company  meets the broad  product
requirements  of this customer  segment.  The  merchandise  assortment  includes
products  previously  available to customers only through  authorized  wholesale
distribution.  The Company has negotiated purchase  arrangements with key lumber
suppliers which ensure a consistent source of high quality lumber.

       The Company  offers a number of special  services  which are  tailored to
meet  the  needs of  various  professional  and  commercial  customer  segments.
Delivery  services  include  next day job-site  delivery and roof top  delivery.
Credit  programs  include a 30-day  revolving  account (Pro Project  Card) and a
full-service  commercial  credit  program which provides  job-based  billing and
other  more  sophisticated  credit  features.  Additionally,  all  stores  offer
automated  blueprint  estimating  services  featuring  rapid  turnaround.   This
estimating  system is unique  in that it  utilizes  a  digitizer  which  ensures
accuracy in the measurement process, and it is fully integrated into the store's
point of sale  ("POS")  system.  The Company  also  supports  the Pro with joint
marketing programs such as its contractor referral data base.

       The Company has a national accounts program which targets businesses with
major  facilities  or multiple  locations  and which  utilize  large  amounts of
building  materials  and  improvement  products  for facility  maintenance.  The
Company continues to develop these accounts which represent multiple  individual
properties for which it provides repair and maintenance products.

       Property management firms are an important component of the Company's Pro
portfolio.  They provide  non-seasonal  repair and  maintenance  business  which
balances business from builders, remodelers and commercial accounts.



<PAGE> 4

       DIY STRATEGY

       The Company's  strategy to defend and increase  market share with the DIY
customer  focuses  primarily on the  project-oriented  DIY-er.  In recent years,
sales to project-oriented DIY-ers represented  approximately 66% of the sales to
DIY-ers while accounting for approximately 50% of the DIY-er  transactions based
on Company  customer data from a sample of stores which the Company believes are
representative of its stores.

       Quality  products,  a wide  assortment,  in-stock  position,  competitive
pricing and service  assistance  on more complex  projects are  important to the
project-oriented  DIY  customer  and have  been the  foundation  upon  which the
Company has built its business with these  customers.  The Company  continues to
upgrade its  assortment  and displays in product  categories  which  represent a
significant portion of the purchases by project-oriented DIY-ers. These upgraded
product  categories  include  paint,  hardware,   tools,   decorative  plumbing,
millwork, kitchen cabinets and home decor.

       Project-oriented  DIY-ers are similar to the Pro customer  with regard to
the brands  preferred and the  importance of stocking high quality  lumber.  The
Company  believes  that many of the steps it has taken to serve the Pro customer
have also had a positive impact on sales to the project-oriented DIY customer.

       Several  additional  components  support the DIY  strategy for growth and
profitability. These include the following:

                  IMPROVED  CUSTOMER  SERVICE.   The  Company  has  an  employee
recognition  and reward program and incentive  compensation  plans for all store
employees to promote outstanding customer service.  Improved customer service is
intended to  increase  the  average  sales  ticket size and the number of repeat
purchasers.

                  DESIGN SERVICES. The Company offers project design services to
its customers.  A computer design system for kitchens,  baths and closet systems
is located in each of the  store's  kitchen  design  centers.  Design  Works,  a
building  packages  design  system  focusing  initially  on decks,  garages  and
post-frame  buildings,  is  operating in all stores.  Both of these  systems are
integrated into the store's POS system, providing on-line pricing,  confirmation
of inventory availability and immediate conversion of an estimate into an order.

                  LUMBERYARD IMPROVEMENTS. Project-oriented DIY-ers are frequent
purchasers  of  the  lumber  and  building  material  products  stocked  in  the
lumberyard.  The drive-through  format lumberyards  mentioned earlier facilitate
the DIY customer purchases of lumberyard products,  saving the customer time and
increasing  customer  satisfaction.  The Company believes this lumberyard format
positions it for increased future sales.

                  SPECIAL EVENTS. The Company offers the project-oriented DIY-er
special  buying  opportunities  through  after-hours  sales and other  preferred
customer programs.


       STRATEGIC INITIATIVES

       The Company  undertook  an  extensive  strategic  review in 1995.  It was
comprehensive  and  included  not only  extensive  consumer  research,  but also
competitive   benchmarking  and  industry  analysis.  The  review  affirmed  the
Company's business strategy, but highlighted areas of opportunity.  Key findings
from the review showed that,  although many consumers like the warehouse format,
a significant number prefer the distinctly different shopping experience offered
by Payless Cashways (full-line,  drive-in lumberyards;  smaller scale; finished,
well-lit  showrooms).  Research  regarding  the Pro  indicates  that,  while the
Company has established significant business with this group, substantial growth
opportunity remains.

       As a result of the  review,  the  Company  intends  to  better  serve DIY
customers  by  increasing  convenience,  service,  and product  assortment  with
particular  emphasis on basic repair and  maintenance  products.  The assortment
additions are designed to produce higher average tickets and increased  shopping
frequency  from DIY customers.  While the Company  expects to grow slightly from
DIY customer  sales,  the Company also expects the  professional  and commercial
customer to continue  to be the primary  source of growth.  In order to increase
market share with those customers,  the Company plans to attract and retain more
large volume accounts, whose business is not store based. Some existing and some
new facilities will be dedicated primarily to these high volume professional and
commercial accounts. The Company intends to improve the product assortment,  key
service  capabilities,  and cost  effectiveness  at facilities  dedicated to Pro
customers.

       This approach is called the "Dual Path" strategy and will be field tested
in Phoenix  and one other  market in 1996.  Of 




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the five  facilities the Company  operates in the Phoenix  market,  four will be
remerchandised to better serve DIY customers with the product offering increased
from about  26,000 stock  keeping  units  ("skus") to between  35,000 and 38,000
skus.  These  stores  will  continue  to serve the  walk-in,  neighborhood-based
tradesman as well. The fifth facility in Phoenix -- renamed Contractor Supply --
will be  dedicated  to  serve  the  large  volume  professional  and  commercial
customers throughout the entire Phoenix marketplace. Most of the Phoenix outside
sales  force will work from this unit which  will have a  business  to  business
selling focus.

       A  significant   aspect  of  the  Dual  Path  strategy   involves  adding
manufacturing capabilities to better serve the needs of high volume professional
and commercial customers.  In January 1996 the Company purchased a door and trim
company in Phoenix,  which  specializes in  manufacturing a wide range of custom
doors,   molding  and  trim  products  used  by  carpenters,   homebuilders  and
remodelers.  Also, the Company's  existing door plant in Dallas will be expanded
to serve the builder,  remodeler  and  carpenter  needs that the  acquired  door
company serves in Phoenix.  The Company  believes that these  capabilities  will
help   position  it  to  be  the  supplier  of  choice  for  the  larger  volume
professional.

       There are a number of other components of the Dual Path strategy that are
also expected to be implemented in other markets and retail  facilities.  During
1996,  approximately 50 stores will have significant DIY assortment additions to
product offerings.  Seven stores -- generally not in metropolitan markets -- are
planned  to be  reoriented  to the  new  Contractor  Supply  format  and  market
position.  Given their location,  facility size and current customer base, their
optimal and most  profitable use is as a dedicated  professional  and commercial
supplier.  Additionally, the Company intends to open one new store in 1996, with
a format  which  refines  the  Company's  new store  design and  represents  the
Company's continuing efforts to optimize the consumer's shopping experience.

       In  furtherance  of the Dual Path  strategy,  the  Company  has  recently
reallocated resources, by selling its ownership interest in Total Home de Mexico
(although it continues as a commercial  partner providing  information  systems,
distribution  and logistics  services at market rates),  selling its Bellingham,
Massachusetts,  distribution  center, and closing six store facilities,  five of
which are in the Boston area.

MERCHANDISING AND MARKETING

       During  1995,  Payless'  full-line  stores sold a broad range of building
material  products  totaling  approximately  26,000  items,  many of  which  are
nationally   advertised   brand-name  items.  Payless  categorizes  its  product
offerings into the classes described below:

                  LUMBERYARD - Dimensional  lumber,  plywood,  sidings,  roofing
       materials,  fencing materials,  windows,  doors and moldings,  insulation
       materials and drywall.

                  HARDWARE  -  Electrical  wire and wiring  materials,  plumbing
       materials,  power and hand tools, paint and painting  supplies,  lawn and
       garden products, door locks, fasteners, and heating and cooling products.

                  SHOWROOM - Interior and exterior  lighting,  bathroom fixtures
       and vanities, kitchen cabinets,  flooring,  panelling,  wallcoverings and
       ceiling tiles.

       During the last three fiscal  years,  the three  product  classifications
accounted for the following percentages of Payless' sales:

                                1993              1994            1995
                                ----              ----            ----
           Lumberyard           48  %            49   %           49  %
           Hardware             33               34               35
           Showroom             19               17               16
                                ----             ----             ----  
                                100  %           100   %          100  %

       Payless   addresses  its  primary  target  customers  through  a  mix  of
newspaper,  direct mail, radio and television  advertising  methods. The primary
media  vehicle  is  newspaper  advertisements,  both  freestanding  inserts  and
run-of-press ads.  Additionally,  the Company participates in or hosts a variety
of customer  hospitality  events,  contractor  product shows and national  trade
association   shows  and   conferences.   During  fiscal  1995,   the  Company's
expenditures  (net of vendor  allowances)  on all forms of  advertising  totaled
approximately $32 million or 1.2% of sales.



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       The Company  utilizes  data base  marketing  techniques  to increase  the
effectiveness of its Pro marketing programs. The data base allows the Company to
track and analyze purchases of Pro customers. This purchase history data is used
in targeted  marketing  campaigns and to develop distinct  customer profiles for
various product  categories.  In addition,  the Company  conducts its own market
research,  including  customer  intercepts,  phone  surveys and  customer  focus
groups.


STORE LOCATIONS

       The Company's 200 full-line stores are located in the following states:

                               No. of Stores                     No. of Stores
                               -------------                     -------------

       Arizona...................  8      Minnesota................. 10
       Arkansas..................  1      Missouri.................. 11
       California................ 16      Montana...................  1
       Colorado.................. 18      Nebraska..................  5
       Illinois..................  6      Nevada....................  5
       Indiana................... 16      New Mexico................  3
       Iowa...................... 10      Ohio...................... 12
       Kansas.................... 11      Oklahoma..................  8
       Kentucky..................  5      Oregon....................  2
       Louisiana.................  1      Tennessee.................  3
       Massachusetts.............  5      Texas..................... 43


       Payless owns 171 of its  full-line  store  facilities  and 160 of the 200
sites on which such stores are located. The remaining 29 stores and 40 sites are
leased.  Mortgages  or  deeds  of trust on 133  store  parcels  secure  existing
indebtedness.

       Payless has generally located retail stores adjacent to residential areas
of  major  metropolitan   cities  or  adjacent  to  major  arteries  in  smaller
communities  which are  convenient  to the DIY and Pro  customer.  Operation  of
multiple stores in a trade area permits more effective supervision of stores and
provides certain economies in distribution  expenses and advertising costs. Each
of  Payless'  200  existing  stores  has  an  average  total  selling  space  of
approximately  186,000  square feet  consisting  of 32,000 square feet of indoor
display space and 154,000 square feet of lumberyard. In addition, each store has
an average of 51,000 square feet of warehouse  space.  The average Payless store
occupies  approximately eight acres of land. The stores built since 1993 average
approximately  242,000 square feet of total retail  selling space  consisting of
60,000 square feet of indoor display space and a 182,000 square foot  lumberyard
with an attached 17,000 square foot warehouse on ten acres of land.

       An average Payless store currently carries  approximately $1.7 million of
inventory, and during fiscal 1995 sales at Payless stores averaged approximately
$13.1 million per store.

       During fiscal 1995,  six  full-line  stores were opened and two full-line
stores were sold.  On December  30,  1995,  six  additional  stores were closed.
During fiscal 1994,  seven full-line  stores were opened and one full-line store
was closed. During fiscal 1993, one full-line store was opened.


STORE MANAGEMENT AND PERSONNEL

       Payless coordinates the operation of its 200 full-line-stores through 100
Group Store  Directors  and Store  Managers  each of whom  reports to one of six
Regional Vice Presidents. Supervision and control over the individual stores are
facilitated by means of detailed operating reports.  All of Payless' Group Store
Directors,  Store Managers, and Regional Vice Presidents have been promoted from
within Payless or from within the stores Payless has acquired.




<PAGE> 7

       To obtain  candidates for store  supervisory  and  management  positions,
Payless  recruits  both  recent  college  graduates  and persons  with  business
experience. These employees are placed in a formal training program administered
by Payless.  In  addition,  Payless  maintains an ongoing  training  program for
existing store  personnel.  Group Store  Directors and Store Managers  typically
have more than ten years of experience with the Company.

       The  stores  utilize a  departmental  management  structure  designed  to
provide a superior level of service to customers.  Sales  associates are trained
in  product  knowledge,  selling  skills  and  systems  and  procedures.  Formal
classroom  training sessions are supplemented with product clinics,  rallies and
special  assignments.  Department  sales managers  typically have more than five
years of experience with the Company.

       Incentive  compensation  systems reward  employees for store  performance
above goal. In addition to management personnel, all sales and support personnel
in the retail stores participate in incentive  compensation  programs. In fiscal
1995,  the  Company  paid  $2.0  million  in  incentive   compensation   to  its
nonmanagement store personnel. Group Store Directors and Store Managers can earn
in excess of 40% of base salary in  incentive  compensation.  The  Company  paid
approximately  $8.1 million in incentive  compensation  to its store  management
personnel for fiscal 1995. The Company believes that its incentive  compensation
systems are key to employee performance and motivation.


INFORMATION SYSTEMS

       The Company has invested  substantial  time,  effort and dollars ensuring
that technology and  information are used to the maximum benefit  throughout its
entire enterprise.  In-store-processors  based upon current technology standards
are integral to  management  of the stores and support  customer  services  with
programs  designed  to  enhance  the  shopping  experience.   A  satellite-based
wide-area-network  (WAN) linking each of the various Company facilities provides
for daily transmission of transaction detail data including SKU-level sales from
point-of-sale  terminals equipped with the latest in scanning  technology.  This
network also serves to provide automatic check  authorization and on-line credit
card  processing.  In addition to sales support and data gathering,  the Company
has built sophisticated  merchandising,  inventory management,  distribution and
promotional  systems  which are utilized at the  corporate  office to manage the
purchasing, movement and marketing of product lines.


DISTRIBUTION AND SUPPLIERS

       The  Company  operates  a total of seven  distribution  centers  and four
manufacturing  locations.  The distribution centers maintain inventories and tag
and ship product to stores on a weekly basis. The Sedalia, Missouri distribution
center  handles  small-sized,  conveyable,  high value  items such as  hardware,
plumbing and electrical  supplies,  and hand tools.  The other six  distribution
centers handle commodity products and bulky manufactured  products such as tubs,
paneling and ceiling tile. The manufacturing  locations  assemble pre-hung doors
and customized windows.

       In fiscal 1995, 51% of merchandise was channeled through the distribution
centers for  redistribution to individual  stores.  This benefits the Company in
the areas of product costs, in-stock positions and inventory turnover.

       The  Sedalia  distribution  center  now  serves 169 stores as well as two
Total  Home  stores  in  Mexico.  The  592,000  square  foot  facility  utilizes
computerized receiving, storage and selection technology.  Excluding the Sedalia
operation,  the Company's  regional  distribution  centers average 18 acres with
154,000  square feet of  warehouse  space,  operating  with  manual  storage and
selection  systems.  In addition,  the Company uses  third-party  operations for
specialized needs.

       Payless purchases substantially all of its merchandise from approximately
3,700  suppliers,  no one of which  accounted  for more than 5% of the Company's
purchases during fiscal 1995.





<PAGE> 8

CREDIT

       The Company  offers credit to both its DIY and Pro  customers.  Purchases
under national credit cards and the Company's  private-label credit card program
as a percentage of sales represented 27.5% in fiscal 1995, 26.2% in fiscal 1994,
and 25.1% in  fiscal  1993.  Purchases  under the  Company's  commercial  credit
program as a percentage  of sales  represented  26.5% in fiscal  1995,  25.1% in
fiscal 1994, and 22.1% in fiscal 1993. The Company's  private-label  credit card
program and commercial  credit program are  administered  by a large finance and
asset management  company.  Accounts  written off (net of recoveries)  under the
commercial credit program in fiscal 1995 were approximately $5.9 million or 0.8%
of net  commercial  credit  sales.  The cost of the  private  label  credit card
program  represents  a fixed  percentage  fee of charge  sales.  The fees on the
commercial  credit program  consist of  administrative  fees which are primarily
tied to  commercial  credit sales and fees for accounts  written off,  which are
substantially all absorbed by the Company.

COMPETITION

       The  business  of  Payless  is  highly  competitive.  Payless  encounters
competition from national and regional chains,  including those with a warehouse
format, and from local independent wholesalers,  supply houses and distributors.
In recent  years,  the building  materials  retailing  industry has  experienced
increased  levels of competition as several  national chains have expanded their
operations.  Certain of these  competitors  are  larger in terms of capital  and
sales volume and have been  operating  longer than Payless in particular  areas.
Although Payless' competition varies by geographical area, Payless believes that
it generally has a favorable  competitive  position as a result of its full-line
lumberyard, broad product mix, customer service, product availability and price.
As a result of the Company's marketing focus on the professional  customer,  the
Company competes with local independent  lumberyards,  independent  wholesalers,
supply  houses  and   distributors   who  market  primarily  to  commercial  and
professional users.

EMPLOYEES

       At November 25, 1995,  Payless  employed  approximately  18,100  persons,
approximately  25% of whom were part-time,  although the number of employees may
fluctuate seasonally.  Payless believes its employee relations are satisfactory.
Payless' employees are primarily nonunion with less than 2% being represented by
a union.

       A substantial portion of the administrative,  purchasing, advertising and
accounting  functions are  centralized at Payless'  headquarters in Kansas City,
Missouri.

                                   ==========

       Forward-looking  statements  in this Form 10-K are made  pursuant  to the
safe harbor provisions of the Private Securities  Litigation Reform Act of 1995.
There  are  certain  important  factors  that  could  cause  results  to  differ
materially  from  those  anticipated  by  some  of the  statements  made  above.
Investors are cautioned that all  forward-looking  statements  involve risks and
uncertainty. In addition to the factors discussed above, among the other factors
that could cause actual results to differ materially are the following: consumer
spending and debt levels;  interest rates; housing activity,  including existing
home turnover and new home  construction;  lumber  prices;  product mix; sale of
certain real estate; growth of certain market segments;  competitive pressure on
sales and pricing, and an excess of retail space devoted to the sale of building
materials.   Additional  information  concerning  those  and  other  factors  is
contained in the Company's Annual Report, copies of which are available from the
Company without charge.

EXECUTIVE OFFICERS OF THE REGISTRANT

       The following table sets forth the name and age of all executive officers
of Payless and their present positions and recent business experience.  There is
no family relationship among Payless' current directors and executive officers.

<TABLE>
<CAPTION>
                                                                    Principal Occupation and
Name                      Age                                     Five-Year Employment History
----                      ---                                     ----------------------------

<S>                       <C>             <C>

David Stanley.............60              Chairman of the Board and Chief Executive Officer of Payless  since
First  elected a director:                August  1986;  and  currently a director of Piper Jaffray Companies, Inc.,
1969                                      Digi  International,  Inc. and Best Buy  Co.,  Inc.  Mr.  Stanley  is  a  
                                          member  of  the  Corporate  Governance  and Nominating Committee of Payless' 
                                          Board of Directors.


<PAGE> 9

Susan M. Stanton..........47              President and Chief Operating Officer of Payless since November 1993; Senior
First elected a director:                 Vice President - Merchandising of Payless from October 1989 to November 1993;
1993                                      and  currently a director of Western  Resources,  Inc. and Commerce  Bank,
                                          N.A.  Ms.  Stanton  is a  member  of  the  Corporate  Governance  and  Nominating
                                          Committee of Payless' Board of Directors.

Gerald M. Buchen..........40              Senior Vice  President - Store  Operations of Payless since  November  1993;  and
                                          Vice  President  -  Merchandising/Lumberyard  of  Payless  from  August  1988  to
                                          November 1993.

Linda J. French...........48              Senior Vice President - General  Counsel/Secretary of Payless since October 1991;
                                          and Vice  President  - General  Counsel/Secretary  of Payless  from April 1986 to
                                          October 1991.

E. J. Holland, Jr.........52              Senior Vice  President - Human  Resources of Payless since June 1992; and Partner
                                          of the law firm Spencer Fane Britt & Browne from January 1974 to June 1992.

Stephen A. Lightstone.....50              Senior Vice President - Finance/Treasurer  and Chief Financial Officer of Payless
                                          since February 1988.

Richard E. Nawrot.........48              Senior Vice  President -  Information  Systems of Payless since  September  1991;
                                          Vice President of Management  Information  Services of Jamesway  Corporation from
                                          February  1991 to  September  1991;  and Senior  Vice  President  - MIS and Chief
                                          Information  Officer of Ames Department  Stores,  Inc. from July 1988 to February
                                          1991.

Richard G. Luse...........48              Vice President - Controller of Payless since February 1988.
</TABLE>


Item 2.  PROPERTIES.
-------  -----------

       Payless owns 171 of its  full-line  store  facilities  and 160 of the 200
sites on which such stores are located. The remaining 29 facilities and 40 sites
are leased. The leases provide for various terms. Mortgages or deeds of trust on
133 store parcels secure existing indebtedness.

       Five of the Company's  seven  distribution  centers are owned and, of the
remaining  two, one is leased for land only and the facility and land are leased
for the other.  Mortgages or deeds of trust on three distribution center parcels
secure existing indebtedness.

       Payless  leases its corporate  office in Kansas City,  Missouri,  under a
lease expiring on November 30, 2002. The  administrative  offices occupy several
floors (approximately 204,000 square feet) of a multi-story building.

       See also "Strategic Initiatives," "Store Locations" and "Distribution and
Suppliers" in Item 1, above.


Item 3.  LEGAL PROCEEDINGS.
------   ------------------

       On January 6, 1995, a group of terminated  employees and others  ("Former
Employees")  filed a lawsuit against the Company and other named defendants (the
"Company"),  entitled The Payless  Cashways,  Inc.  Partners [et al.] v. Payless
Cashways,  Inc. [et al], in the United  States  District  Court for the Southern
District of Iowa. The Former  Employees  include  management  employees who were
terminated  effective  January 10, 1994, in connection with a reduction in force
pursuant to a restructuring,  in which the Company eliminated certain management
in the field organization.  The complaint asserted a variety of claims including
federal and state securities fraud claims,  alleged  violations of the Racketeer
Influenced  and  Corrupt  Organizations  Act,  federal  and state  claims of age
discrimination,  alleged violations of the Employment Retirement Income Security
Act of 1974,  and  various  state law  claims  including,  but not  limited  to,
fraudulent misrepresentation allegations. The complaint also asserted the Former
Employees'  claims as class  representatives  and  sought to expand the group of
party plaintiffs as to the federal age discrimination  claims.  Various forms of
relief,  including  unspecified  monetary damages and an injunctive  order, were
requested.



<PAGE> 10

       The Company, in response, filed a motion to dismiss as to the majority of
the pending claims except the federal and state age  discrimination  claims, the
state  law  fraudulent  misrepresentation  claim  and  several  other  state law
equitable claims.  The Former Employees  responded,  in part, by filing a second
amended complaint, providing in large part additional supportive factual detail.
To avoid filing a second  motion to dismiss,  the Company filed a reply brief in
support of the motion to dismiss. A hearing was held on the motion to dismiss on
August 18, 1995 and, as of this date,  no ruling has been  entered.  Each of the
parties has  propounded  written  discovery  pursuant to the court's  scheduling
order and discovery plan.

       The  Company  denies  any and all  claimed  liability  and is  vigorously
defending this  litigation,  but, given the early state of this  litigation,  is
unable to  estimate a  potential  range of  monetary  exposure,  if any,  to the
Company or to predict the likely outcome of this matter.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
-------  ----------------------------------------------------

       None.


                                     PART II
                                     -------


Item 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED 
-------  -----------------------------------------------------
         STOCKHOLDER MATTERS
         -------------------

       Market and dividend information, included on page 32 of the Annual Report
to  Shareholders  for the fiscal year ended November 25, 1995, are  incorporated
herein by reference.


Item 6.  SELECTED FINANCIAL DATA.
-------  ------------------------

       The Five-Year Financial Summary, included on page 28 of the Annual Report
to  Shareholders  for the fiscal year ended  November 25, 1995, is  incorporated
herein by reference.


Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-------  -----------------------------------------------------------------------
         OF OPERATIONS.
         --------------

       Management's  Discussion  and  Analysis of the  Financial  Condition  and
Results of  Operations,  included  on pages 6 through 9 of the Annual  Report to
Shareholders for the fiscal year ended November 25, 1995, is incorporated herein
by reference.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------  --------------------------------------------

       The financial  statements and independent  auditors' report,  included on
pages 10 through 27 of the Annual  Report to  Shareholders  for the fiscal  year
ended November 25, 1995, are incorporated herein by reference.

       The Quarterly Consolidated Statements of Operations,  included on pages 4
and 5 of the Annual Report to  Shareholders  for the fiscal year ended  November
25, 1995, are incorporated herein by reference.


Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
-------  ---------------------------------------------------------------
         FINANCIAL DISCLOSURE.
         ---------------------

       None.





<PAGE> 11

                                    PART III
                                    --------


Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------  ---------------------------------------------------

       The  information  required  by this item with  respect to  directors  and
compliance  with  Section  16(a)  of the  Securities  Exchange  Act of  1934  is
incorporated  herein by reference to the  Registrant's  Proxy  Statement for the
1996 Annual  Meeting of  Shareholders,  dated  February  23,  1996,  to be filed
pursuant to Regulation 14A. The required information as to executive officers is
set forth in Part I hereof.


Item 11.  EXECUTIVE COMPENSATION.
--------  -----------------------

       The information required by this item is incorporated herein by reference
to the Registrant's Proxy Statement for the 1996 Annual Meeting of Shareholders,
dated February 23, 1996, to be filed pursuant to Regulation 14A.


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------  ---------------------------------------------------------------

       The  information  called  for by this  item  is  incorporated  herein  by
reference to the  Registrant's  Proxy  Statement for the 1996 Annual  Meeting of
Shareholders, dated February 23, 1996, to be filed pursuant to Regulation 14A.


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------  -----------------------------------------------

       The  information  called  for by this  item  is  incorporated  herein  by
reference to the  Registrant's  Proxy  Statement for the 1996 Annual  Meeting of
Shareholders, dated February 23, 1996, to be filed pursuant to Regulation 14A.


                                     PART IV
                                     -------


Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
--------  -----------------------------------------------------------------

 (a)  Document list.

      1. and 2.   The  response  to this  portion of Item 14 is  submitted  as a
                  separate section of this report.

      3.          List of exhibits.

      3.1         Restated    Articles   of   Incorporation   of   the   Company
                  (incorporated  by  reference  to Exhibit  3.1 filed as part of
                  Amendment No. 1 to Registration Statement No. 33-58008 on Form
                  S-2 on March 8, 1993).

      3.2         By-laws of the Company  (incorporated  by reference to Exhibit
                  3.1 filed as part of  Payless'  Quarterly  Report on Form 10-Q
                  for the quarter ended August 27, 1994).

      4.0         Long-term  debt  instruments  of the Registrant in amounts not
                  exceeding  ten  percent  (10%)  of  the  total  assets  of the
                  Registrant and its subsidiary on a consolidated  basis will be
                  furnished to the Commission upon request.

      4.1         Amended and Restated  Credit  Agreement,  dated as of November
                  20, 1995,  among  Payless,  the Banks listed on the  signature
                  pages thereof and Canadian Imperial Bank of Commerce, New York
                  Agency, as Administrative Agent.

      4.2         Indenture  dated as of April 20, 1993, by and between  Payless
                  and United States Trust Company of New York, pursuant to which
                  the 9 1/8% Senior  Subordinated Notes of Payless due April 15,
                  2003,  were issued  (incorporated  by reference to Exhibit 4.2
                  filed as part of  Payless'  Quarterly  Report on Form 10-Q for
                  the quarter ended May 29, 1993).

      4.3         Amended and Restated Warrant Agreement, dated as of January 1,
                  1993,  to  Warrant  Agreement  dated as of  November  1, 1988,
                  between  Payless  and  Bank  of  New  York   (incorporated  by
                  reference to Exhibit 4.1(b) of Payless'  Annual Report on Form
                  10-K for the fiscal year ended  November 28, 1992,  as amended
                  by Form 8, dated  February  1, 1993).



<PAGE> 12 

      4.4(a)      Loan  Agreement  dated  June 20,  1989,  by and among  Payless
                  Cashways,  Inc., Knox Home Centers, Inc. ("Knox"),  Somerville
                  Lumber and Supply Co., Inc. ("Somerville"), and The Prudential
                  Insurance  Company of America  (incorporated  by  reference to
                  Exhibit 4.2 filed as part of Payless' Quarterly Report on Form
                  10-Q for the quarter ended May 27, 1989).

      4.4(b)      Promissory  Note  dated  June 20,  1989,  from  Payless to The
                  Prudential  Insurance  Company  of  America,  Tranche  B  (MN)
                  (incorporated  by  reference  to Exhibit 4.12 filed as part of
                  Payless'  Quarterly  Report on Form 10-Q for the quarter ended
                  May 27, 1989).

      4.4(c)      Promissory  Note  dated  June 20,  1989,  from  Payless to The
                  Prudential  Insurance  Company  of  America,  Tranche  B  (MT)
                  (incorporated  by  reference  to Exhibit 4.13 filed as part of
                  Payless'  Quarterly  Report on Form 10-Q for the quarter ended
                  May 27, 1989).

      4.4(d)      Promissory  Note  dated  June 20,  1989,  from  Payless to the
                  Prudential  Insurance  Company  of  America,  Tranche  B  (ND)
                  (incorporated  by  reference  to Exhibit 4.14 filed as part of
                  Payless'  Quarterly  Report on Form 10-Q for the quarter ended
                  May 27, 1989).

      4.4(e)      Promissory  Note  dated  June 20,  1989,  from  Payless to The
                  Prudential  Insurance  Company  of  America,  Tranche  B  (NV)
                  (incorporated  by  reference  to Exhibit  4.15 filed a part of
                  Payless'  Quarterly  Report on Form 10-Q for the quarter ended
                  May 27, 1989).

      4.4(f)      Promissory  Note  dated  June 20,  1989,  from  Payless to The
                  Prudential  Insurance  Company of America,  Tranche B (AZ, CA)
                  (incorporated  by  reference  to Exhibit 4.16 filed as part of
                  Payless'  Quarterly  Report on Form 10-Q for the quarter ended
                  May 27, 1989).

      4.4(g)      Promissory  Note  dated  June 20,  1989,  from  Payless to The
                  Prudential  Insurance  Company of America,  Tranche C (IN, KY,
                  NM, OH, TN)(incorporated by reference to Exhibit 4.17 filed as
                  part of Payless' Quarterly Report on Form 10-Q for the quarter
                  ended May 27, 1989).

      4.4(h)      Promissory  Note  dated  June 20,  1989,  from  Payless to The
                  Prudential  Insurance  Company of America,  Tranche D (CO, IA,
                  IL, KS, NE, MO, TX,  OR, OK)  (incorporated  by  reference  to
                  Exhibit  4.18 filed as part of  Payless'  Quarterly  Report on
                  Form 10-Q for the quarter ended May 27, 1989).

      4.4(i)      Form  of  Deed  of  Trust,  Mortgage  and  Security  Agreement
                  effective  June 20, 1989,  given to The  Prudential  Insurance
                  Company of America  (incorporated by reference to Exhibit 4.19
                  filed as part of  Payless'  Quarterly  Report on Form 10-Q for
                  the quarter ended May 27, 1989).

      4.4(j)      Form of Deed of Trust,  Security  Agreement and  Assignment of
                  Leases dated June 20, 1989,  given to Morgan Bank  (Delaware),
                  as Collateral Agent (incorporated by reference to Exhibit 4.20
                  filed as part of  Payless'  Quarterly  Report on Form 10-Q for
                  the quarter ended May 27, 1989).

      4.4(k)      First Modification  Agreement dated as of October 18, 1991, by
                  and  among  Payless,   Knox,  Somerville  and  The  Prudential
                  Insurance  Company of America  (incorporated  by  reference to
                  Exhibit 4.9(r) filed as part of Payless' Annual Report on Form
                  10-K for fiscal year ended November 30, 1991).

      4.4(l)      Second  Modification  Agreement dated as of December 17, 1991,
                  by and among  Payless,  Knox,  Somerville  and The  Prudential
                  Insurance  Company of America  (incorporated  by  reference to
                  Exhibit 4.9(s) filed as part of Payless' Annual Report on Form
                  10-K for fiscal year ended November 30, 1991).

      4.4(m)      Third Modification Agreement dated as of December 31, 1991, by
                  and  among  Payless,   Knox,  Somerville  and  the  Prudential
                  Insurance  Company of America  (incorporated  by  reference to
                  Exhibit 4.9(t) filed as part of Payless' Annual Report on Form
                  10-K for fiscal year ended November 30, 1991).

      4.4(n)      Fourth  Modification  Agreement  dated as of March 8, 1993, by
                  and among Payless,  Somerville  and The  Prudential  Insurance
                  Company  of  America  (incorporated  by  reference  to exhibit
                  4.6(v)  filed  as  part of  Amendment  No.  1 to  Registration
                  Statement No. 33-58008 on Form S-2 on March 8, 1993).

      4.4(o)      Letter  dated March 12,  1993  modifying  Fourth  Modification
                  Agreement  dated as of March 8,  1993,  by and among  Payless,
                  Somerville  and The  Prudential  Insurance  Company of America
                  (incorporated  by reference to Exhibit 4.5(w) filed as part of
                  Registration  Statement No.  33-59854 on Form S-2 on March 19,
                  1993).



<PAGE> 13

      4.4(p)      Fifth Modification Agreement, dated as of May 25, 1995, by and
                  among Payless, Somerville and The Prudential Insurance Company
                  of America  (incorporated by reference to Exhibit 4.1 filed as
                  part of Payless' Quarterly Report on Form 10-Q for the quarter
                  ended August 27, 1995).

      4.4(q)      Sixth Modification Agreement dated as of November 21, 1995, by
                  and among  Payless  and The  Prudential  Insurance  Company of
                  America.

      4.5         Borrower Security Agreement,  dated November 18, 1994, made by
                  Payless for the benefit of Canadian Imperial Bank of Commerce,
                  New York Agency,  as Collateral Agent, and the banks and other
                  financial  institutions  party  to the 1994  Credit  Agreement
                  (incorporated  by  reference  to Exhibit  4.5 filed as part of
                  Payless'  Annual  Report on Form 10-K for  fiscal  year  ended
                  November 26, 1994).

      4.6         Stock Pledge  Agreement,  dated  November  18,  1994,  made by
                  Payless for the benefit of Canadian Imperial Bank of Commerce,
                  New York Agency,  as Collateral Agent, and the banks and other
                  financial  institutions  party  to the 1994  Credit  Agreement
                  (incorporated  by  reference  to Exhibit  4.8 filed as part of
                  Payless'  Annual Report on Form 10-K for the fiscal year ended
                  November 26, 1994).

      4.7         Inter-Facility  Agreement,  dated  November  18,  1994,  among
                  Canadian Imperial Bank of Commerce,  New York Agency, The Bank
                  of Nova Scotia,  Nationsbank of Texas,  N.A.,  Bank of America
                  National Trust and Savings  Association,  Commerce Bank, N.A.,
                  Payless and Somerville  (incorporated  by reference to Exhibit
                  4.9 filed as part of Payless'  Annual  Report on Form 10-K for
                  the fiscal year ended November 26, 1994).

      10.1        Indemnification   Agreement   (incorporated  by  reference  to
                  Exhibit 10.2 filed as part of Amendment No. 2 to  Registration
                  Statement No. 33-49772 filed August 26, 1992).

      10.2(a)*    Payless  Cashways,   Inc.   Corporate   Management   Incentive
                  Compensation Program,  dated as of December 1991 (incorporated
                  by  reference  to  Exhibit  10.2  filed  as part  of  Payless'
                  Quarterly  Report on Form 10-Q for the  quarter  ended May 30,
                  1992).

      10.2(b)*    First Amendment to Payless Cashways, Inc. Corporate Management
                  Incentive  Compensation Program,  dated as of February 2, 1995
                  (incorporated by reference to Exhibit 10.3(b) filed as part of
                  Payless'  Annual Report on Form 10-K for the fiscal year ended
                  November 26, 1994).

      10.3*       Employment  Agreement  dated  as of  June  16,  1995,  between
                  Payless  and  David  Stanley  (incorporated  by  reference  to
                  Exhibit  10.1 filed as part of  Payless'  Quarterly  Report on
                  Form 10-Q for the quarter ended May 27, 1995).

      10.4*       Employment  Agreement  dated as of February  8, 1993,  between
                  Payless and Susan M.  Stanton  (incorporated  by  reference to
                  Exhibit  10.26  filed as part of  Registration  Statement  No.
                  33-58008 on Form S-2 on February 8, 1993).

      10.5*       Employment  Agreement  dated as of February  8, 1993,  between
                  Payless and Stephen A. Lightstone  (incorporated  by reference
                  to Exhibit 10.25 filed as part of  Registration  Statement No.
                  33-58008 on Form S-2 on February 8, 1993).

      10.6*       Retirement  Agreement  dated as of November 14, 1993,  between
                  Payless and Harold Cohen (incorporated by reference to Exhibit
                  10.6(c)  filed as part of Payless'  Annual Report on Form 10-K
                  for the fiscal year ended November 27, 1993).

      10.7(a)*    Payless Cashways,  Inc. Wealth-Op  Deferred  Compensation Plan
                  (incorporated  by  reference  to Exhibit 10.8 filed as part of
                  Post-Effective  Amendment No. 7 to Registration  Statement No.
                  33-23893 on Form S-2 filed May 26, 1992).

      10.7(b)*    Amendment to Payless'  Wealth-Op  Deferred  Compensation  Plan
                  (incorporated  by reference to Exhibit  10.10(b) filed as part
                  of  Payless'  Annual  Report on Form 10-K for the fiscal  year
                  ended November 27, 1993).

      10.8(a)*    Payless  Cashways,   Inc.  1988  Deferred   Compensation  Plan
                  (incorporated  by reference to Exhibit  10.11(a) filed as part
                  of  Payless'  Annual  Report on Form 10-K for the fiscal  year
                  ended November 27, 1993).

      10.8(b)*    Amendment  to  Payless'   1988  Deferred   Compensation   Plan
                  (incorporated  by reference to Exhibit  10.11(b) filed as part
                  of  Payless'  Annual  Report on Form 10-K for the fiscal  year
                  ended  November  27,  1993).



<PAGE> 14

      10.9(a)*    Payless  Cashways,   Inc.   Supplemental  Death  Benefit  Plan
                  (incorporated  by reference to Exhibit  10.12 filed as part of
                  Payless'  Annual Report on Form 10-K for the fiscal year ended
                  November 27, 1993).

      10.9(b)*    First  Amendment to the Payless  Cashways,  Inc.  Supplemental
                  Death  Benefit  Plan,  dated June 16,  1994  (incorporated  by
                  reference to Exhibit 10.1 filed as part of Payless'  Quarterly
                  Report on Form 10-Q for the quarter ended May 28, 1994).

      10.10*      Payless   Cashways,    Inc.   Supplemental   Disability   Plan
                  (incorporated  by reference to Exhibit  10.13 filed as part of
                  Payless'  Annual Report on Form 10-K for the fiscal year ended
                  November 27, 1993).

      10.11(a)*   Payless Cashways,  Inc. Supplemental  Retirement Plan dated as
                  of  January  1, 1988  (incorporated  by  reference  to Exhibit
                  10.14(a) filed as part of Payless'  Annual Report on Form 10-K
                  for the fiscal year ended November 27, 1993).

      10.11(b)*   First  Amendment,  effective  June 22,  1989,  to the  Payless
                  Cashways,  Inc.  Supplemental  Retirement  Plan  dated  as  of
                  January 1, 1988 (incorporated by reference to Exhibit 10.14(b)
                  filed as part of Payless'  Annual  Report on Form 10-K for the
                  fiscal year ended November 27, 1993).

      10.11(c)*   Second Amendment dated as of September 7, 1993, to the Payless
                  Cashways,  Inc.  Supplemental  Retirement  Plan  dated  as  of
                  January 1, 1988 (incorporated by reference to Exhibit 10.14(c)
                  filed as part of Payless'  Annual  Report on Form 10-K for the
                  fiscal year ended November 26, 1994).

      10.11(d)*   Third  Amendment  dated as of August 31, 1994,  to the Payless
                  Cashways,  Inc.  Supplemental  Retirement  Plan  dated  as  of
                  January 1, 1988  (incorporated by reference to Exhibit 10.1(a)
                  filed as part of  Payless'  Quarterly  Report on Form 10-Q for
                  the quarter ended August 27, 1994).

      10.11(e)*   Agreement for Supplemental Retirement Benefits between Payless
                  and David  Stanley  as of August  31,  1994  (incorporated  by
                  reference  to  Exhibit  10.1(b)  filed  as  part  of  Payless'
                  Quarterly Report on Form 10-Q for the quarter ended August 27,
                  1994).

      10.11(f)*   Fourth  Amendment,  effective  June 16,  1995,  to the Payless
                  Cashways,  Inc.  Supplemental  Retirement  Plan  dated  as  of
                  January 1, 1988  (incorporated  by  reference  to Exhibit 10.2
                  filed as part of the  Payless'  Quarterly  Report on Form 10-Q
                  for the quarter ended August 27, 1995).

      10.12(a)    Registration  Rights  Agreement  dated as of August  4,  1988,
                  among PCI  Acquisition  Corp. and certain of its  shareholders
                  (incorporated  by reference to Exhibit  10.15(a) filed as part
                  of  Payless'  Annual  Report on Form 10-K for the fiscal  year
                  ended November 27, 1993).

      10.12(b)    Agreement  and  Amendment  dated as of November 11,  1988,  to
                  Registration  Rights  Agreement  dated as of August  4,  1988,
                  among Payless and certain of its shareholders (incorporated by
                  reference to Exhibit  10.15(b)filed as part of Payless' Annual
                  Report on Form 10-K for the  fiscal  year ended  November  27,
                  1993).

      10.12(c)    Addendum to Shareholders'  Agreement and  Registration  Rights
                  Agreement  dated  February 22, 1989,  by and among Payless and
                  certain of its  shareholders  (incorporated  by  reference  to
                  Exhibit  10.15(c)  filed as part of Payless'  Annual Report on
                  Form 10-K for the fiscal year ended November 27, 1993).

      10.13(a)    Amended  and  Restated  Shareholders'  Agreement,  dated as of
                  February  22, 1990,  by and among PCI  Acquisition  Corp.  and
                  certain of its  shareholders  (incorporated  by  reference  to
                  Exhibit 10.47 filed as part of Post-Effective  Amendment No. 3
                  to Registration Statement No. 33-23893 on Form S-2 filed March
                  23, 1990).

      10.13(b)    Amendment No. 1 dated as of March 18, 1991, to the Amended and
                  Restated  Shareholders'  Agreement  dated as of  February  22,
                  1990,  by and among  Payless and  certain of its  shareholders
                  (incorporated  by reference to Exhibit  10.43(b) filed as part
                  of  Post-Effective  Amendment No. 5 to Registration  Statement
                  No. 33-23893 on Form S-2 filed March 21, 1991).

      10.14(a)*   1988 Payless Cashways,  Inc. Employee Stock Plan (incorporated
                  by  reference  to  Annex  1  filed  as  part  of  Registration
                  Statement No. 33-24368 on Form S-8 filed September 9, 1988).




<PAGE> 15

      10.14(b)*   First Amendment to the 1988 Payless  Cashways,  Inc.  Employee
                  Stock Plan, dated November 11, 1988 (incorporated by reference
                  to Exhibit 10.1(b) filed as part of Payless'  Quarterly Report
                  on Form 10-Q for the quarter ended February 25, 1989).

      10.14(c)*   Second Amendment to the 1988 Payless  Cashways,  Inc. Employee
                  Stock Plan, dated February 22, 1989 (incorporated by reference
                  to Exhibit 10.1(c) filed as part of Payless'  Quarterly Report
                  on Form 10-Q for the quarter ended February 25, 1989).

      10.14(d)*   Third Amendment to the 1988 Payless  Cashways,  Inc.  Employee
                  Stock Plan, dated March 6, 1990  (incorporated by reference to
                  Exhibit 10.2 of Payless' Quarterly Report on Form 10-Q for the
                  quarter ended February 24, 1990).

      10.14(e)*   Form of  Performance  Stock Option  Agreement  pursuant to the
                  1988 Payless Cashways, Inc. Employee Stock Option Plan amended
                  on  June  20,  1991  (incorporated  by  reference  to  Exhibit
                  10.21(e) filed as part of Payless'  Annual Report on Form 10-K
                  for fiscal year ended November 30, 1991).

      10.14(f)*   Amendment to the 1988 Payless  Cashways,  Inc.  Employee Stock
                  Plan,  dated as of May 1, 1992  (incorporated  by reference to
                  Exhibit 10.26 filed as part of Post-Effective  Amendment No. 7
                  to Form S-2 Registration  Statement No. 33-23893 filed May 26,
                  1992).

      10.15*      Payless Cashways 1992 Incentive Stock Program (incorporated by
                  reference to Exhibit 10.24 filed as part of Amendment No. 2 to
                  Registration  Statement No.  33-49772 on Form S-2 filed August
                  26, 1992).

      10.16*      Payless  Cashways   Director  Option  Plan   (incorporated  by
                  reference  to  Exhibit  10.23  filed  as part of  Registration
                  Statement No. 33-59854 on Form S-2 on March 19, 1993).

      10.17*      Payless  Cashways,   Inc.   Deferred   Compensation  Plan  for
                  Directors, dated as of October 20, 1995.

      11.1        Computation of per share earnings.

      13.1        Annual Report to Shareholders.

      23.1        Consent of KPMG Peat Marwick LLP.

      27.1        Financial data schedule.

* Represents a management contract or a compensatory plan or arrangement.

Copies of any or all Exhibits will be furnished upon written request and payment
of Payless' reasonable expenses in furnishing the Exhibits.

(b)      Reports on Form 8-K.

         No  reports on Form 8-K have been  filed by the  Registrant  during the
         quarter ended November 25, 1995.

(c)      Exhibits.

         The  response  to this  portion of Item 14 is  submitted  as a separate
         section of this report.

(d)      Financial Statement Schedules.

         The  response  to this  portion of Item 14 is  submitted  as a separate
         section of this report.



<PAGE> 16

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  Payless  has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
                                 PAYLESS CASHWAYS, INC.
                                 (Registrant)

                                 By s/David Stanley
                                    --------------------------------------------
                                    David Stanley, Principal Executive Officer
Dated:  February 15, 1996

 Pursuant to the  requirements  of the  Securities  Exchange  Act of 1934,  this
report has been signed below by the  following  persons on behalf of Payless and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>


               Signature                                    Title                                       Date
         ------------------------              -------------------------------                 ---------------------

         <S>                                   <C>                                               <C>
         s/David Stanley
         ------------------------
         David Stanley                         Chief Executive Officer and                       February 15, 1996
                                               Chairman of the Board
                                               (Principal Executive Officer)

         s/Susan M. Stanton
         ------------------------
         Susan M. Stanton                      President and Chief Operating                     February 15, 1996
                                               Officer and Director

         s/Ralph Strangis
         ------------------------
         Ralph Strangis                        Lead Director                                     February 15, 1996


         s/Harold Cohen
         ------------------------
         Harold Cohen                          Director                                          February 15, 1996


         s/Scott G. Fossel
         ------------------------
         Scott G. Fossel                       Director                                          February 15, 1996


         s/William A. Hall
         ------------------------
         William A. Hall                       Director                                          February 15, 1996


         s/George Latimer
         ------------------------
         George Latimer                        Director                                          February 15, 1996


              
         ------------------------
         Wayne B. Lyon                         Director                                          February , 1996


         s/Gary D. Rose
         ------------------------
         Gary D. Rose                          Director                                          February 15, 1996


         s/Louis W. Smith
         ------------------------
         Louis W. Smith                        Director                                          February 15, 1996


         s/John H. Weitnauer, Jr.
         ------------------------
         John H. Weitnauer, Jr.                Director                                          February 15, 1996

         s/Stephen A. Lightstone
         ------------------------
         Stephen A. Lightstone                 Senior Vice President-Finance/                    February 15, 1996
                                               Treasurer and Chief Financial
                                               Officer (Principal Financial
                                               Officer and Principal
                                               Accounting Officer

</TABLE>


<PAGE> 17






                           ANNUAL REPORT ON FORM 10-K




                       ITEM 14(a) (1) and (2), (c) and (d)



         LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES


                          FINANCIAL STATEMENT SCHEDULES


                                    EXHIBITS



                          YEAR ENDED NOVEMBER 25, 1995


                     PAYLESS CASHWAYS, INC., and subsidiary


                              KANSAS CITY, MISSOURI




<PAGE> 18


                     PAYLESS CASHWAYS, INC., and subsidiary

                        FORM 10-K--ITEM 14(a) (1) and (2)

         LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES


         The following  consolidated  financial  statements of Payless Cashways,
Inc., and subsidiary  included in Payless' Annual Report to the Shareholders for
the year ended November 25, 1995, are incorporated by reference in Item 8:

     Consolidated Balance Sheets--November 25, 1995, and November 26, 1994.

     Consolidated  Statements  of  Operations--fiscal  years ended  November 25,
     1995, November 26, 1994, and November 27, 1993.

     Consolidated   Statements  of  Shareholders'   Equity--fiscal  years  ended
     November 25, 1995, November 26, 1994, and November 27, 1993.

     Consolidated  Statements  of Cash  Flows--fiscal  years ended  November 25,
     1995, November 26, 1994, and November 27, 1993.

     Notes to Consolidated Financial Statements.

         The following financial statement schedules of Payless Cashways,  Inc.,
and subsidiary are included in Item 14(d):

              VIII - Valuation and Qualifying Accounts

         All other  schedules  for  which  provision  is made in the  applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related  instructions  or are  inapplicable,  and therefore  have been
omitted.




<PAGE> 19


                       [KPMG Peat Marwick LLP Letterhead]








                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



The Board of Directors
Payless Cashways, Inc.:


Under date of January 9, 1996, we reported on the consolidated balance sheets of
Payless  Cashways,  Inc. and subsidiary as of November 25, 1995 and November 26,
1994,  and the related  consolidated  statements  of  operations,  shareholders'
equity  and cash  flows for each of the fiscal  years in the  three-year  period
ended November 25, 1995, as contained in the 1995 annual report to shareholders.
These consolidated  financial statements and our report thereon are incorporated
by  reference  in the annual  report on Form 10-K for the fiscal  year 1995.  In
connection  with  our  audits  of  the  aforementioned   consolidated  financial
statements,  we  also  audited  the  related  consolidated  financial  statement
schedule  as listed  in the  accompanying  index.  This  consolidated  financial
statement  schedule  is the  responsibility  of the  Company's  management.  Our
responsibility is to express an opinion on this consolidated financial statement
schedule based on our audits.

In our opinion,  such financial statement schedule,  when considered in relation
to the  basic  consolidated  financial  statements  taken as a  whole,  presents
fairly, in all material respects, the information set forth therein.




s/KPMG Peat Marwick LLP



Kansas City, Missouri
January 9, 1996




<PAGE> 20


                                                      


                SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS

                     PAYLESS CASHWAYS, INC., and subsidiary
                                 (In thousands)

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
               COL. A                         COL. B                COL. C                COL. D                  COL. E
-----------------------------------------------------------------------------------------------------------------------------------
                                            Balance at            Charged to                                    Balance at
                                            beginning              cost and                                       end of
             Description                    of period              expenses             Deductions                period
-----------------------------------------------------------------------------------------------------------------------------------



<S>                                         <C>                   <C>                   <C>                     <C>

YEAR ENDED NOVEMBER 25, 1995:
     Reserve for Inventory Shrink
     and Obsolescence.................      $  16,661             $  33,108             $  29,415               $  20,354


YEAR ENDED NOVEMBER 26, 1994:
     Reserve for Inventory Shrink
     and Obsolescence.................      $  18,252             $  21,920             $  23,511               $  16,661


YEAR ENDED NOVEMBER 27, 1993:
     Reserve for Inventory Shrink
     and Obsolescence.................      $  12,848             $  23,948             $  18,544               $  18,252

</TABLE>