<PAGE>1


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-Q

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

             For the quarterly period ended February 24, 2001

                                       Or

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

             For the transition period from             to

             Commission file number 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)                               Identification 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 re-
ports  required to be filed by  Section 12, 13, or 15(d) of the  Securities  Ex-
change 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, 2001.

<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 24,                        February 26,
                                                                              2001                                2000(a)
                                                                       ---------------------------------------------------
     <S>                                                               <C>                                <C>
     Net sales                                                         $        232,885                   $        347,113
     Cost of merchandise sold (2)                                               166,952                            248,027
                                                                       ---------------------------------------------------
     Gross Profit                                                                65,933                             99,086


     Selling, general and administrative expenses                                62,339                             93,629
     Other income                                                                  (342)                              (464)
     Special charges                                                                ---                                194
     Provision for depreciation and amortization                                  6,957                              8,936
                                                                       ---------------------------------------------------

                          OPERATING LOSS                                         (3,021)                            (3,209)

     Interest expense                                                             9,848                             10,086
                                                                       ---------------------------------------------------

                             LOSS BEFORE INCOME TAXES                           (12,869)                           (13,295)

Federal and state income taxes (3)                                              (13,148)                            (9,077)
                                                                       ---------------------------------------------------

                                   NET INCOME/(LOSS)                   $            279                   $         (4,218)
                                                                       ===================================================

Net income/(loss) per common share-basic  (4)                          $           0.01                   $          (0.21)
                                                                       ===================================================

Weighted average common shares outstanding (4)                                   20,000                             20,000
                                                                       ===================================================

Weighted average common and dilutive
     common equivalent shares outstanding                                        20,009                             20,000
                                                                       ---------------------------------------------------

Net income (loss) per common share-diluted (4)                         $           0.01                    $         (0.21)
                                                                       ===================================================

<FN>
(a) As adjusted-see note (2)
</FN>
    See notes to condensed financial statements
</TABLE>

<PAGE>3


CONDENSED BALANCE SHEETS (Unaudited) (1)
<TABLE>
<CAPTION>
                                                                 February 24,           November 25,          February 26,
(In thousands)                                                       2001                 2000 (a)              2000 (a)
                                                                ----------------------------------------------------------
<S>                                                             <C>                    <C>                   <C>
ASSETS

     CURRENT ASSETS
       Cash and cash equivalents                                $        843           $       1,485         $     1,150
       Merchandise inventories (2)                                   291,406                 314,061             382,075
       Prepaid expenses and other current assets                      19,857                  19,246              15,669
       Income taxes receivable                                            --                      --                 675
                                                                --------------------------------------------------------
                                        TOTAL CURRENT ASSETS         312,106                 334,792             399,569

     OTHER ASSETS
       Real estate held for sale                                      23,422                   3,785               6,312
       Deferred financing costs                                        3,221                   3,051               3,707
       Other                                                           2,787                   3,090               1,538

     LAND, BUILDINGS, EQUIPMENT AND SOFTWARE                         393,145                 430,971             410,703
       Allowance for depreciation and amortization                   (95,563)                (95,459)            (75,737)
                                                                --------------------------------------------------------
         NET  LAND, BUILDINGS AND EQUIPMENT                          297,582                 335,512             334,966
                                                                --------------------------------------------------------
                                                                $    639,118           $     680,230         $   746,092
                                                                ========================================================


LIABILITIES AND STOCKHOLDERS' EQUITY

     CURRENT LIABILITIES
       Current portion of long-term debt (5)                    $     10,185          $     10,181          $        168
       Trade accounts payable                                         68,134                38,633                63,866
       Other current liabilities                                      51,232                76,537                64,160
       Income taxes payable                                              899                   927                 1,846
       Deferred income taxes                                           2,362                 5,510                 4,682
                                                                --------------------------------------------------------
                                   TOTAL CURRENT LIABILITIES         132,812               131,788               134,722

     LONG-TERM DEBT, less portion
       classified as current liability (5)                           331,348               363,432               402,345

     NON-CURRENT LIABILITIES
       Deferred income taxes                                           3,192                13,192                20,768
       Other                                                          37,073                37,404                37,194

     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                                           (49,107)              (49,386)              (32,737)
                                                                --------------------------------------------------------
                                  TOTAL STOCKHOLDERS' EQUITY         134,693               134,414               151,063
                                                                --------------------------------------------------------

                                                                $    639,118          $    680,230          $    746,092
                                                                ========================================================

<FN>
(a)   As adjusted-see note (2)
</FN>
      See notes to condensed financial statements
</TABLE>

<PAGE>4


CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (1)
<TABLE>
<CAPTION>
                                                                                          Thirteen Weeks Ended
                                                                             ----------------------------------------------
                                                                                February 24,                   February 26,
(In thousands)                                                                      2001                          2000 (a)
                                                                             ----------------------------------------------
<S>                                                                          <C>                          <C>
Cash Flows from Operating Activities

     Net income/(loss)                                                       $             279            $         (4,218)
     Adjustments to reconcile net income/(loss) to net cash
       provided by operating activities:
         Depreciation and amortization                                                   6,957                       8,936
         Deferred income taxes                                                         (13,148)                     (9,077)
         Non-cash interest                                                                 430                         330
         Other                                                                          (1,014)                       (489)
     Changes in assets and liabilities                                                  24,083                     (20,843)
                                                                             ----------------------------------------------

     NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                17,587                     (25,361)

Cash Flows from Investing Activities

     Additions to land, buildings and equipment                                         (1,551)                     (2,522)
     Proceeds from sale of land, buildings and equipment                                16,026                       2,998
     Decrease in other assets                                                              303                          11
                                                                             ---------------------------------------------

     NET CASH PROVIDED BY INVESTING ACTIVITIES                                          14,778                         487

Cash Flows from Financing Activities

     Principal payments on long-term debt                                              (13,994)                     (5,493)
     Net proceeds from/(payments on) revolving credit facility                         (18,086)                     30,587
     Other                                                                                (927)                       (181)
                                                                             ---------------------------------------------

     NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                               (33,007)                     24,913
                                                                             ---------------------------------------------

     Net increase (decrease) in cash and cash equivalents                                 (642)                         39
     Cash and cash equivalents, beginning of period                                      1,485                       1,111
                                                                             ---------------------------------------------
     Cash and cash equivalents, end of period                                $             843            $          1,150
                                                                             =============================================
<FN>
(a)  As adjusted-see note (2)
</FN>
     See notes to condensed financial statements
</TABLE>

<PAGE>5


NOTES TO CONDENSED FINANCIAL STATEMENTS

Thirteen weeks ended February 24, 2001, and February 26, 2000

(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  25,
       2000, 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 25, 2000,
       condensed  balance  sheet has been  derived  from the  audited  financial
       statements  as of that date except for those  amounts which were impacted
       by the  change  in  accounting  method  discussed  in note  (2).  Certain
       reclassifications  have been made to the  February  26,  2000,  financial
       statements to conform to the current presentation.

(2)    In the first  quarter of fiscal  2001 the  Company  changed its method of
       accounting for certain hardware  inventories from the last-in,  first-out
       (LIFO) method to the first-in,  first-out  (FIFO) method.  As a result of
       the trend towards declining unit costs of this  merchandise,  the Company
       believes  that the new method is  preferable  because  the FIFO method of
       valuing  inventory  more closely  matches  current  costs and revenues in
       periods of declining  prices.  The  Company's  method of  accounting  for
       lumber  and  related  merchandise  is  the  FIFO  method,  which  remains
       unchanged.  Prior period financial statements have been restated to apply
       the  method  retroactively.  The  impacts  of the  change  on  previously
       reported  results for the thirteen  weeks ended  February 26, 2000 are as
       follows (in thousands):

                                      Net loss as previously reported   $(5,242)
   Adjustment for effect of change in accounting method for inventory     1,024
                                                                          -----

                                               Net income as adjusted   $(4,218)

  Net loss per common share-basic and diluted, as previously reported     $(.26)
   Adjustment for effect of change in accounting method for inventory       .05
                                                                           ----

             Net loss per common share-basic and diluted, as adjusted     $(.21)
                                                                           ====
The impacts of the change on the previously reported accumulated  deficit are as
follows (in thousands):

      Accumulated deficit at February 26, 2000 as previously reported  $(35,745)
   Adjustment for effect of change in accounting method for inventory     3,008
                                                                         ------

                 Accumulated deficit at February 26, 2000 as adjusted  $(32,737)
                                                                         ======

      Accumulated deficit at November 25, 2000 as previously reported  $(51,054)
   Adjustment for effect of change in accounting method for inventory     1,668
                                                                         ------

                 Accumulated deficit at November 25, 2000 as adjusted  $(49,386)
                                                                         ======

(3)    A non-cash,  non-recurring  income tax benefit of $8.0 million  ($.40 per
       share) was  recorded  in the first  quarter of fiscal  2001.  The benefit
       resulted  from  an  adjustment  to   non-current   deferred   income  tax
       liabilities  that was  prompted by  settlements  of  numerous  prior year
       income tax  examinations.  In addition,  the  effective  tax rate for the
       first quarter of 2000 reflected the  utilization  of a long-term  capital
       loss  carry-forward  resulting  from  the sale of a  certain  partnership
       interest (approximately $3.8 million or $.19 per share).

<PAGE>6


(4)    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 quarter of fiscal 2000,
       the impact of such stock options was antidilutive.

(5)    A special  charge of $20.4 million ($11.6 million after tax) was recorded
       in the fourth quarter of fiscal 2000 in connection with the closing of 23
       stores.  In addition,  the Company  recorded an inventory  write-down  of
       $11.8 million ($7.4 million after tax),  included in cost of  merchandise
       sold in the fourth quarter,  in connection  with the store closings.  The
       2000 special charge included:

<TABLE>
<CAPTION>

                                                                     Amount                Amount                 Reserve
                                                                     Charged              Utilized                   at
       (In millions)                                                   2000            Through 2/24/01            2/24/01
                                                                ---------------------------------------------------------
       <S>                                                          <C>                     <C>                   <C>
       Severance                                                    $   2.5                 $   2.5               $   ---
       Other costs                                                     17.9                    11.0                   6.9
                                                                ---------------------------------------------------------
                                                                    $  20.4                 $  13.5               $   6.9
</TABLE>


(6)    Long-term debt consisted of the following:
<TABLE>
<CAPTION>
                                                                 February 24,            November 25,        February 26,
       (In thousands)                                                2001                   2000                 2000
                                                                ---------------------------------------------------------
       <S>                                                      <C>                    <C>                    <C>
       1999 Credit Agreement, variable interest rate            $    171,770           $    189,856           $   213,973
       1997 Credit Agreement, variable interest rate                 106,048                106,048               107,314
       Mortgage loan, variable interest rate                          62,967                 76,906                80,310
       Other senior debt                                                 748                    803                   916
                                                                ---------------------------------------------------------
                                                                     341,533                373,613               402,513
       Less portion classified as current liability                  (10,185)               (10,181)                 (168)
                                                                ---------------------------------------------------------
                                                                $    331,348           $    363,432           $   402,345
                                                                =========================================================
</TABLE>

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

RESULTS OF OPERATIONS

Sales

Net  sales  for the  quarter  ended  February  24,  2001,  decreased  28.9% on a
same-store  sales  basis and  decreased  32.9%  from the same  period of 2000 in
total. (Same stores are those open one full year.) The same-store sales decrease
for the first  quarter is  primarily  due to  significant  commodity  deflation,
unusually  adverse  weather  conditions  in various  parts of the country,  some
degree of general industry  economic slowdown and reductions in mass advertising
activity.  Same-store  sales to  professional  customers  decreased  22.8% while
same-store sales to  do-it-yourself  customers  declined 36.9%. The sales mix by
customer type was approximately 62% professional and 38% do-it-yourself compared
with 57% professional and 43%  do-it-yourself  for the quarter last year. During
the first  quarter of 2001,  the Company  closed 23 stores.  Sales from these 23
stores  were $12.1  million and $36.5  million in the first  quarter of 2001 and
2000, respectively.

Costs and Expenses

Cost of  merchandise  sold,  as a percent of sales,  was 71.7% and 71.5% for the
first quarter of 2001 and 2000, respectively. The increase for the first quarter
of 2001 was due  primarily  to the  negative  impact  of the 23  store  closings
(1.6%).  Sales at these  locations  were recorded at a 0% gross margin.  Cost of
merchandise  sold in the first  quarter of 2000 was  decreased  by $1.7  million

<PAGE>7


(0.5%)  from the  previously  reported  results to reflect  the  restatement  of
inventory  value  from  LIFO  to  FIFO.  See  note  (2) to  condensed  financial
statements.

Selling,  general and administrative  expenses were 26.8% and 27.0% of sales for
the  first  quarter  of  2001  and  2000,  respectively.  Selling,  general  and
administrative  expenses for the first quarter of 2001  decreased  $31.3 million
compared to the same period of the prior year. This decrease  primarily reflects
the impact of significant expense control measures (approximately $20.5 million)
and store closings ($10.8 million).

The provision for  depreciation  and amortization was 3.0% and 2.5% of sales for
the first quarter of 2001 and 2000, respectively.

Interest  expense for the first quarter of 2001  decreased  compared to the same
period of 2000  primarily  due to lower  borrowing  levels  combined  with lower
interest rates in 2001.

The income tax benefit for the first quarter of 2001 was $13.1 million  compared
to $9.1 million for the first  quarter of 2000.  The effective tax rate for 2001
was  different  from  the  35%  statutory  rate  primarily  due  to a  non-cash,
non-recurring  income tax benefit of $8.0 million  ($.40 per share)  recorded in
the first  quarter of fiscal 2001.  The benefit  resulted  from an adjustment to
non-current  deferred income tax liabilities that was prompted by settlements of
numerous prior year income tax examinations. In addition, the effective tax rate
for the first quarter of 2000 reflected the  utilization of a long-term  capital
loss  carry-forward  resulting from the sale of a certain  partnership  interest
(approximately  $3.8  million  or $.19 per  share).  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 Income

Net income for the quarter ended February 24, 2001, was $0.3 million compared to
a net loss of $4.2  million  for the same  period of 2000.  The  increase in net
income was  primarily the result of the income tax benefit  described  above and
improved gross margin management coupled with continued expense control.  Income
per common share was $0.01 for the first  quarter of fiscal 2001, an increase of
$.22 from a loss of $.21 per common share for the same period of fiscal 2000.

NEW ACCOUNTING PRONOUNCEMENTS

In June of 1998,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("FAS") No. 133,  "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). This statement,  as
amended by FAS No. 138,  "Accounting  for  Certain  Derivative  Instruments  and
Certain Hedging Activities-an  Amendment of FASB Statement No. 133", 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 ineffective portion
of a hedging  instrument,  the change in fair value will affect  current  period
earnings. The FASB delayed the effective date of implementing the standard until
January 1, 2001, and therefore the Company was required to adopt SFAS 133 in the
first quarter of fiscal 2001.  The Company does not presently  engage in hedging
activities  or  own  any  derivative  instruments  that  require  the  described
treatment.

<PAGE>8


In September  2000, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") No. 140,  "Accounting for
Transfers and Servicing of Financial Assets and  Extinguishment of Liabilities",
which  replaces SFAS 125,  "Accounting  for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities". This standard revises the methods for
accounting  for  securitizations  and other  transfers of  financial  assets and
collateral as outlined in SFAS 125, and requires certain additional disclosures.
For  transfers  and  servicing  of  financial  assets  and   extinguishments  of
liabilities, this standard will be effective for transfers occurring after March
31, 2001. However, for disclosure regarding  securitizations and collateral,  as
well as recognition and  reclassification  of collateral,  this standard will be
effective  for fiscal  years ending  after  December  15,  2000.  The Company is
currently  evaluating the impact of the adoption of this  standard.  The Company
does not  presently  believe  that the  adoption  of this  standard  will have a
material effect on its financial position or results of operation.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities was $17.6 million for the first quarter of
2001  compared to cash used of $25.4  million  for the same period of 2000.  The
increase  in cash  provided  by  operating  activities  was  primarily  due to a
decrease in merchandise  inventories versus increases in the prior year quarter.
During  the  first  quarters  of  2001  and  2000,  the  Company  used  cash  of
approximately  $8.0  million  and  $1.0  million,   respectively,  in  operating
activities  related to the execution of the 2000 and 1999  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 24, 2001,  $10.2 million was available for
borrowing.  At February 24, 2001, working capital was $179.3 million compared to
$203.0  million and $264.8  million at November 25, 2000, and February 26, 2000,
respectively.  The current  ratios at February 24, 2001,  November 25, 2000, and
February 26, 2000, were 2.35 to 1, 2.54 to 1, and 2.97 to 1,  respectively.  The
primary  reasons for the decrease in working  capital and the current ratio were
decreases in merchandise inventories. The 1999 Credit Agreement contains certain
customary operational covenants and events of default for financing of this type
as well as a minimum  adjusted  net worth  covenant  set at $135 million for the
term of the  agreement.  The minimum  adjusted net worth  covenant  excludes the
effects of certain non-cash charges and credits.  The cumulative  amount of such
non-cash charges at February 24, 2001, was $9.7 million.

The  Company's  business is  seasonal,  with the winter  months being the lowest
sales months and the  spring/summer  months being the strongest sales period. As
such,  the Company  typically  generates a loss  during the first  quarter,  and
requires  additional  borrowings  to fund  operations,  as  well  as to  finance
seasonal  inventory  transition  in  anticipation  of the  peak-selling  season.
Accordingly,  the  Company's  liquidity  is mostly  dependent  on its ability to
secure seasonal  borrowings during the slow months,  and its ability to generate
sufficient sales to repay these borrowings  during its peak-selling  season.  On
January 31, 2001, the Company  seasonally  expanded its revolving line of credit
with  supplemental  loan  participation  from a  third  party.  On  January  31,
borrowing  availability under the Company's $260 million existing line of credit
increased by 5% for a six-month time period.  This additional  participation  of
$15.0  million  by the  aforementioned  third  party as part of the 1999  Credit
Agreement will support the 5% advance rate increase through July 31, 2001.

During the first four months of 2001, the Company experienced a softening in its
sales compared to the same period of fiscal 2000.  This softness is attributable
to three primary factors:  significant  commodity  deflation,  unusually adverse
weather  conditions in various parts of the country,  and some degree of general
industry  economic  slowdown.  While  management does not believe this softening
will persist  throughout  the balance of fiscal 2001,  the  Company's  liquidity
position  and its  ability  to  comply  with  covenants  contained  in its  loan
agreements  and to service  its future  obligations  could be  impacted if these
conditions were to persist or become more severe.

The Company's  primary  investing  activities are capital  expenditures  for the
renovation of existing stores, improved technology and additional equipment. The
Company  spent  approximately  $1.6  million and $2.5  million  during the first
quarter of 2001 and 2000,  respectively,  for  renovation  of  existing  stores,
improved technology and additional equipment. The Company intends to finance the
remaining  fiscal 2001  capital  expenditures  of  approximately  $8.5  million,
consisting  primarily  of 10  to 15  store  remodels,  additional  manufacturing
capabilities  and routine  maintenance  with funds  generated  from  operations.
During the first quarter of 2001 and 2000,  the Company sold 8 and 2 real estate
properties,  respectively, related to stores previously closed for approximately
$15.1 million and $2.8 million of cash proceeds,  respectively,  which were used
to  reduce  outstanding  debt.  Based  on  current  real  estate  contracts  and
estimates,  the Company expects to receive  approximately $15.0 to $20.0 million
in additional  proceeds in the last three quarters of fiscal 2001 as a result of
sales from the remaining properties.

<PAGE>9


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 through the end of fiscal 2001 without additional financing.

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 cause actual  results to differ  materially are the
following: competitor activities; stability of customer demand; stability of the
work force;  supplier  and lender  support;  consumer  spending and debt levels;
interest  rates;  new  and  existing   housing   activity;   commodity   prices,
specifically  lumber and wallboard;  product and customer mix; growth of certain
market  segments;  weather;  an excess of retail  space  devoted  to the sale of
building  materials;  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 25, 2000.

REVIEW BY INDEPENDENT AUDITORS

The condensed  financial  statements of Payless Cashways,  Inc. for the thirteen
week periods ended February 24, 2001, and February 26, 2000,  have been reviewed
by KPMG LLP, independent auditors.

                          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.

         None

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

<PAGE>10


         a.     Exhibits.
                4.0     Long term debt instruments of the Company in amounts not
                        exceeding ten percent (10%) of the total assets  of  the
                        Company will be furnished upon request.

               18.0     Letter on change in accounting principles - KPMG LLP.

         b.     Reports on Form 8-K.

                The  Registrant has filed two  reports  on Form 8-K  during  the
                quarter ended February 24, 2001.  The reports were dated January
                11, 2001 and February 1, 2001,  and both  contained  information
                under  Item 7, Financial Statements  and  Exhibits,  and Item 9,
                Regulation FD Disclosure.

<PAGE>11


                                    SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                    PAYLESS CASHWAYS, INC.
                                    (Registrant)


Date:  April 4, 2001                By:      /s/ Richard B. Witaszak
                                    --------------------------------------------
                                    Richard  B. Witaszak, Senior Vice President-
                                    Finance and Chief Financial Officer (Princi-
                                    pal Financial Officer and Principal Account-
                                    ing Officer)