<PAGE>1


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-Q

(Mark One)
  / X /           Quarterly report pursuant to Section 13 or 15(d) of  the Secu-
                  rities Exchange Act of 1934

                  For the quarterly period ended February 26, 2000

                                       Or

  /     /         Transition report pursuant to Section 13 or 15(d) of the Secu-
                  rities Exchange Act of 1934

                  For the transition period from             to

                  Commission file number 0-4437


                             PAYLESS CASHWAYS, INC.
             (Exact Name of Registrant as Specified in Its Charter)

         Delaware                                                     42-0945849
(State or Other Jurisdiction of                                 (I.R.S. Employer
Incorporation or Organization)                                   tification No.)


         800 NW Chipman Road, Suite 5900
         P.O. Box 648001
         Lee's Summit, Missouri                                       64064-8001
(Address of Principal Executive Offices)                              (Zip Code)

                  (816) 347-6000
(Registrant's Telephone Number, Including Area Code)

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 regis-
trant  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 whether  the  registrant  has  filed  all  documents  and
reports  required to be filed by  Section  12, 13,  or 15(d)  of the  Securities
Exchange  Act of 1934  subsequent  to the  distribution  of  securities  under a
plan  confirmed  by a court.  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.

There were 20,000,000 shares of Common Stock, $.01 par value,  outstanding as of
March 31, 2000.

<PAGE>2


PAYLESS CASHWAYS, INC.

                         PART I -- FINANCIAL INFORMATION

Item 1.  Financial Statements

STATEMENTS OF OPERATIONS (Unaudited) (1)
(In thousands, except per share amounts)




<TABLE>
<CAPTION>
                                                                                       Thirteen Weeks Ended
                                                                       ---------------------------------------------------
                                                                          February 26,                       February 27,
                                                                              2000                               1999
                                                                       ---------------------------------------------------
<S>                                                                    <C>                                <C>
Income

     Net sales                                                         $        347,113                   $        391,873
     Other income                                                                   464                                345
                                                                       ---------------------------------------------------
                                                                                347,577                            392,218

Costs and Expenses

     Cost of merchandise sold                                                   249,706                            285,939
     Selling, general and administrative                                         93,823                            106,517
     Provision for depreciation and amortization                                  8,936                              8,936
     Interest expense                                                            10,086                              8,612
                                                                       ---------------------------------------------------
                                                                                362,551                            410,004
                                                                       ---------------------------------------------------

                             LOSS BEFORE INCOME TAXES                           (14,974)                           (17,786)

Federal and state income taxes                                                   (9,732)                            (7,826)
                                                                       ----------------------------------------------------

                                             NET LOSS                  $         (5,242)                          $ (9,960)
                                                                       ====================================================

Net loss per common share-basic and diluted (2)                        $          (0.26)                             (0.50)
                                                                       ====================================================

Weighted average common shares outstanding (2)                                   20,000                             20,000
                                                                       ===================================================


See notes to condensed financial statements
</TABLE>

<PAGE>3

CONDENSED BALANCE SHEETS (Unaudited) (1)

<TABLE>
<CAPTION>
                                                                 February 26,           November 27,          February 27,
(In thousands)                                                       2000                   1999                  1999
                                                                ----------------------------------------------------------
<S>                                                             <C>                    <C>                   <C
ASSETS

     CURRENT ASSETS

       Cash and cash equivalents                                $      1,150           $       1,111         $     3,967
       Merchandise inventories (3)                                   377,305                 349,332             374,908
       Prepaid expenses and other current assets                      15,669                  22,013              20,395
       Income taxes receivable                                           675                     679               1,164
       Deferred income taxes                                              --                      --               5,376
                                                                --------------------------------------------------------
                                        TOTAL CURRENT ASSETS         394,799                 373,135             405,810

     OTHER ASSETS

       Real estate held for sale                                       6,312                   8,851              11,286
       Deferred financing costs                                        3,707                   3,944               2,992
       Other                                                           1,538                   1,549               1,653

     LAND, BUILDINGS, EQUIPMENT AND SOFTWARE                         410,703                 407,812             391,024
       Allowance for depreciation and amortization                   (75,737)                (66,900)            (42,391)
                                                                --------------------------------------------------------
         TOTAL LAND, BUILDINGS AND EQUIPMENT                         334,966                 340,912             348,633
                                                                --------------------------------------------------------

                                                                $    741,322           $     728,391         $   770,374
                                                                ========================================================


LIABILITIES AND STOCKHOLDERS' EQUITY

     CURRENT LIABILITIES
       Current portion of long-term debt (4)                    $        168          $      3,265          $     10,150
       Trade accounts payable                                         63,866                51,480                55,323
       Other current liabilities                                      78,725                88,645               105,876
       Income taxes payable                                            1,846                 1,851                 2,171
       Deferred income taxes                                           4,682                 2,157                    --
                                                                --------------------------------------------------------
                                   TOTAL CURRENT LIABILITIES         149,287               147,398               173,520

     LONG-TERM DEBT, less portion
       classified as current liability (4)                           402,345               374,154               390,707

     NON-CURRENT LIABILITIES
       Deferred income taxes                                          19,006                31,263                36,666
       Other                                                          22,629                22,279                18,008

     STOCKHOLDERS' EQUITY
       Common Stock, $.01 par value, 50,000,000 shares

         authorized, 20,000,000 shares issued                            200                   200                   200
       Additional paid-in capital                                    183,600               183,600               183,600
       Accumulated deficit                                           (35,745)              (30,503)              (32,327)
                                                                --------------------------------------------------------
                                  TOTAL STOCKHOLDERS' EQUITY         148,055               153,297               151,473
                                                                --------------------------------------------------------

                                                                $    741,322          $    728,391          $    770,374
                                                                ========================================================


See notes to condensed financial statements
</TABLE>

<PAGE>4


CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (1)

<TABLE>
<CAPTION>
                                                                                          Thirteen Weeks Ended
                                                                             --------------------------------------------
                                                                                February 26,                 February 27,
(In thousands)                                                                      2000                         1999
                                                                             --------------------------------------------
<S>                                                                          <C>                            <C>

Cash Flows from Operating Activities

     Net loss                                                                $          (5,242)             $       (9,960)
     Adjustments to reconcile net loss to net cash
       provided by operating activities:
         Depreciation and amortization                                                   8,936                       8,936
         Deferred income taxes                                                          (9,732)                     (7,826)
         Non-cash interest                                                                 330                         377
         Other                                                                            (489)                        191
     Changes in assets and liabilities                                                 (19,164)                    (39,138)
                                                                             ----------------------------------------------

     NET CASH USED IN OPERATING ACTIVITIES                                             (25,361)                    (47,420)

Cash Flows from Investing Activities

     Additions to land, buildings and equipment                                         (2,522)                     (8,684)
     Proceeds from sale of land, buildings and equipment                                 2,998                       5,101
     (Increase) decrease in other assets                                                    11                        (162)
                                                                             ----------------------------------------------

     NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                   487                      (3,745)

Cash Flows from Financing Activities

     Principal payments on long-term debt                                               (5,493)                     (4,768)
     Net proceeds from revolving credit facility                                        30,587                      58,000
     Other                                                                                (181)                        (50)
                                                                             ----------------------------------------------

     NET CASH PROVIDED BY FINANCING ACTIVITIES                                          24,913                      53,182
                                                                             ---------------------------------------------

     Net increase in cash and cash equivalents                                              39                       2,017
     Cash and cash equivalents, beginning of period                                      1,111                       1,950
                                                                             ---------------------------------------------
     Cash and cash equivalents, end of period                                $           1,150            $          3,967
                                                                             =============================================


See notes to condensed financial statements
</TABLE>

<PAGE>5


NOTES TO CONDENSED FINANCIAL STATEMENTS

Thirteen weeks ended February 26, 2000, and February 27, 1999

(1)    The  accompanying  condensed  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  financial   statements   incorporated  by
       reference  in the  Company's  Form 10-K for the year ended  November  27,
       1999, such information and footnotes have not been duplicated  herein. In
       the  opinion  of  management,  all  adjustments,   consisting  of  normal
       recurring  accruals,  considered  necessary  for a fair  presentation  of
       financial  statements have been reflected herein.  The November 27, 1999,
       condensed  balance  sheet has been  derived  from the  audited  financial
       statements as of that date. Certain  reclassifications  have been made to
       the February 27, 1999,  financial  statements  to conform to the November
       27, 1999, and February 26, 2000, presentation.

(2)    Basic   earnings  per  common  share  has  been  computed  based  on  the
       weighted-average  number of common shares  outstanding during the period.
       Dilutive   earnings   per  common   share  is   computed   based  on  the
       weighted-average  number of common  shares plus  potential  common shares
       outstanding during the period, when dilutive, consisting of certain stock
       options. Given the net loss reported in the first quarters of fiscal 2000
       and 1999, the impact of such stock options would be antidilutive.

(3)    Approximately 79% of the Company's  inventories are valued using the LIFO
       (last-in,  first-out) method.  Because inventory  determination under the
       LIFO  method is only  made at the end of each  fiscal  year  based on the
       inventory levels and costs at that time, interim LIFO determinations must
       necessarily  be based on  management's  estimates  of  expected  year-end
       inventory  levels and costs.  Since future  estimates of inventory levels
       and costs are subject to change,  interim  financial  results reflect the
       Company's most recent estimate of the effect of inflation and are subject
       to  final  year-end  LIFO  inventory  amounts.  If  the  FIFO  (first-in,
       first-out)  method of inventory  accounting had been used by the Company,
       inventories would have been $3.3 million,  $3.3 million, and $1.9 million
       lower than reported at February 26, 2000, November 27, 1999, and February
       27, 1999, respectively.

(4)    Long-term debt consisted of the following:
<TABLE>
<CAPTION>
                                                                 February 26,            November 27,         February 27,
       (In thousands)                                                2000                   1999                  1999
                                                                ----------------------------------------------------------
       <S>                                                      <C>                    <C>                    <C>
       1999 Credit Agreement, variable interest rate            $    213,973           $    183,386           $        --
       1997 Credit Agreement, variable interest rate                 107,314                109,415               308,138
       Mortgage loan, variable interest rate                          80,310                 83,686                91,653
       Other senior debt                                                 916                    932                 1,066
                                                                ---------------------------------------------------------
                                                                     402,513                377,419               400,857
       Less portion classified as current liability                     (168)                (3,265)              (10,150)
                                                                ---------------------------------------------------------
                                                                $    402,345           $    374,154           $   390,707
                                                                =========================================================
</TABLE>

<PAGE>6


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

RESULTS OF OPERATIONS

Income

Net  sales  for  the  quarter  ended  February  26,  2000,  decreased  8.4% on a
same-store  sales  basis and  decreased  11.4%  from the same  period of 1999 in
total. (Same stores are those open one full year.) The same-store sales decrease
for the  first  quarter  is  primarily  due to  inclement  weather,  competitive
pressures and certain  actions taken during the quarter to develop a sustainable
profit  model.  These  actions  included a shift in product mix to higher margin
products,  as well as the elimination of unprofitable  items, and the collection
of  fees  for  value-added  services,  such  as  special  orders  and  delivery.
Same-store sales to professional customers decreased 3.4% while same-store sales
to do-it-yourself  customers declined 14.3%.  During 1999, the Company closed 12
stores and closed an additional  store in the first quarter of 2000.  Sales from
these 13 stores were $1.3 million and $15.6 million in the first quarter of 2000
and 1999, respectively.

Costs and Expenses

Cost of  merchandise  sold,  as a percent of sales,  was 71.9% and 73.0% for the
first  quarter of 2000 and 1999,  respectively.  The  improvement  for the first
quarter of 2000 was due to a shift in product mix to higher margin products,  as
well as the elimination of unprofitable items.

Selling,  general and administrative  expenses were 27.0% and 27.3% of sales for
the  first  quarter  of  2000  and  1999,  respectively.  Selling,  general  and
administrative  expenses for the first quarter of 2000  decreased  approximately
$12.7  million  compared  to the same period of the prior  year.  This  decrease
primarily  reflects the impact of closed  stores and expense  control  measures,
including the freezing of the pension program.

The provision for  depreciation  and amortization was 2.6% and 2.2% of sales for
the first quarter of 2000 and 1999, respectively.

Interest  expense for the first quarter of 2000  increased  compared to the same
period of 1999  primarily due to higher  interest rates and, to a lesser extent,
higher borrowing levels in 2000.

The income tax benefit for the first  quarter of 2000 was $9.7 million  compared
to $7.8 million for the first quarter of 1999.  The effective tax rates for 2000
and 1999 were  different  from the 35% statutory  rate  primarily due to various
expenses  that are  permanently  non-deductible  for  income  tax  purposes.  In
addition,  the  effective  tax rate  for  2000  reflects  the  utilization  of a
long-term  capital  loss  carry-forward  resulting  from the  sale of a  certain
partnership  interest.  Such tax benefits reflect management's  estimates of the
annual effective tax rates at the end of each quarter, and are subject to change
throughout the year.

Net Loss

Net loss for the quarter ended February 26, 2000,  was $5.2 million  compared to
$10.0  million  for the  same  period  of  1999.  The  decrease  in net loss was
primarily  the result of improved  gross margin  management,  continued  expense
control,  and the tax benefit  from the  capital  loss  carry-forward.  Loss per
common share was $0.26 for the first  quarter of fiscal 2000, a decrease  from a
loss of $.50 per common share for the same period of fiscal 1999.

NEW ACCOUNTING PRONOUNCEMENTS

In June of 1998, the Financial  Accounting  Standards Board issued  Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging Activities" ("SFAS 133"). This statement establishes  accounting and
reporting standards for derivative  instruments and all hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities  at their fair  market  values.  Accounting  for changes in the fair
value  of a  derivative  depends  on  its  designation  and  effectiveness.  For
derivatives that qualify as effective hedges, the change in fair value will have
no impact on earnings until the hedged item affects  earnings.  For  derivatives
that are not designated as hedging instruments, or for the

<PAGE>7


MANAGEMENT'S DISCUSSION AND ANALYSIS - Continued


ineffective  portion  of a hedging  instrument,  the  change in fair  value will
affect current period earnings. The Company will adopt SFAS 133 during the first
quarter  of  fiscal  2001 and does not  presently  believe  that it will  have a
significant effect on its financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Cash used in operating  activities  was $25.4  million for the first  quarter of
2000 compared to $47.4 million for the same period of 1999. The decrease in cash
used in  operating  activities  was  primarily  due to a lower  net  loss and an
increase in accounts  payable due to  improved  vendor  terms.  During the first
quarters of 2000 and 1999, the Company used cash of  approximately  $1.0 million
and $3.8 million, respectively, in operating activities related to the execution
of the 1999 and 1998  restructuring  plans. Due to seasonally lower sales in the
winter  months,  cash flow in the first  quarter  represents  a small  amount of
annual operating cash flow.

Borrowings  are available  under the 1999 Credit  Agreement to  supplement  cash
generated by  operations.  At February 26, 2000,  $8.5 million was available for
borrowing under the 1999 Credit Agreement.  On March 8, 2000, availability under
the 1999 Credit  Agreement was increased  for a 90-day  period  covering  March,
April and May 2000 by increasing the inventory advance rate from 65% to 70%. The
purpose of this increase is to permit the Company to expand  inventory levels in
several categories in anticipation of heightened  customer demand for the coming
spring selling season. At February 26, 2000,  working capital was $245.5 million
compared to $225.7 million and $232.3 million at November 27, 1999, and February
27, 1999,  respectively.  The current ratios at February 26, 2000,  November 27,
1999,  and  February  27,  1999,  were  2.64  to 1,  2.53 to 1,  and  2.34 to 1,
respectively.

The Company's  primary  investing  activities are capital  expenditures  for the
renovation of existing stores, improved technology and additional equipment. The
Company  spent  approximately  $2.5  million and $8.7  million  during the first
quarter of 2000 and 1999,  respectively,  for  renovation  of  existing  stores,
improved technology and additional equipment. The Company intends to finance the
remaining  fiscal  2000  capital  expenditures  of  approximately  $26  million,
consisting  primarily  of  improved  technology,  30 to 35 store  remodels,  new
stores, additional manufacturing capabilities and routine maintenance with funds
generated from operations,  sales of real estate,  and borrowings under the 1999
Credit  Agreement.  During the first quarter of 2000,  the Company sold two real
estate properties  related to stores  previously  closed for approximately  $2.8
million of cash proceeds.

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 1999
Credit  Agreement  should  provide   sufficient   liquidity  to  meet  all  cash
requirements for the next 12 months without additional financing. As a result of
the  Chapter 11 filing in July 1997,  trade  creditors  significantly  shortened
credit terms.  The Company  believes  that  progress with regard to  lengthening
terms and reestablishing  trade credit is continuing,  but availability of trade
credit cannot be assured.

FORWARD-LOOKING STATEMENTS

Statements  above  in  the  subsections  of  this  report  entitled  "Costs  and
Expenses," "New Accounting Pronouncements" and "Liquidity and Capital Resources"
such as "unlikely", "intend", "estimates", "believe", "expect", "anticipate" and
similar expressions,  which are not historical,  are forward-looking  statements
that  involve  risks  and  uncertainties.   Such  statements  include,   without
limitation, the Company's expectation as to future performance.

Such forward-looking  statements 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 the  forward-looking  statements made above. These statements are
based on the current  plans and  expectations  of the Company and  investors are
cautioned that all  forward-looking  statements  involve risks and  uncertainty.
Among the factors that could

<PAGE>8


MANAGEMENT'S DISCUSSION AND ANALYSIS - Continued


cause  actual  results  to  differ  materially  are  the  following:  competitor
activities;  stability of customer demand; stability of the work force; supplier
support;  consumer spending and debt levels;  interest rates;  housing activity;
lumber prices;  product mix;  growth of certain  market  segments;  weather;  an
excess of retail space devoted to the sale of building materials; the successful
implementation of an Internet ordering system;  and the success of the Company's
strategy,   including  its  e-commerce  opportunities.   Additional  information
concerning these and other factors is contained in the Company's  Securities and
Exchange Commission filings,  including but not limited to the Form 10-K, copies
of which are available  from the Company  without charge or on the Company's web
site, www.payless.cashways.com.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

No  material  changes in the  Company's  exposure to certain  market  risks have
occurred from the discussion  contained in Item 7A, Quantitative and Qualitative
Disclosures  About Market Risk,  filed as part of the Company's Annual Report to
Stockholders on Form 10-K for the fiscal year ended November 27, 1999.

REVIEW BY INDEPENDENT AUDITORS

The condensed  financial  statements of Payless Cashways,  Inc. for the thirteen
week periods ended February 26, 2000, and February 27, 1999,  have been reviewed
by KPMG LLP, independent auditors. Their report is included in this filing.

                          PART II -- OTHER INFORMATION

Item 1.  Legal Proceedings.

         There are presently no material legal proceedings to which Payless is a
party or of which its property is the subject.

Item 4.  Submission of Matters to a Vote of Security Holders.

         None.

Item 5.  Other Information.

         The Company has appointed  Richard B. Witaszak as Senior Vice President
         of Finance and Chief Financial Officer.  Mr. Witaszak joins the Company
         with  over  15 years of  experience  in  all  areas of  accounting  and
         finance,  including  both  retail and  wholesale  operations.  Most re-
         cently  he  served as  executive  vice  president  and chief  financial
         officer of Fred's,  Inc., a multi-unit retailer.

Item 6.  Exhibits and Reports on Form 8-K.

         a.     Exhibits.

                4.1      Letter agreement  with Congress Financial  Corporation
                         (Central)  dated March 8, 2000.

               10.1(a)* Form of Employment  Agreement  (Form A) between  Payless
                        and certain executive officers.

               10.1(b)* Form of Employment  Agreement  (Form B) between  Payless
                        and certain executive officers.

               15.1     Letter re unaudited financial information - KPMG LLP.

               27.1     Financial data schedule.

         b.     Reports on Form 8-K.

                None

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

<PAGE>9


                                    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:  April 6, 2000               By:    /s/  Timothy  R. Mertz


                                   Timothy R. Mertz, Acting Chief
                                   Financial Officer and Vice President-Treasury
                                   (Principal Financial Officer and Principal
                                   Accounting Officer)