KANSAS CITY, Mo., March 14 /PRNewswire/ -- Payless Cashways, Inc.
(OTC Bulletin Board: PCSH), a full-line building materials and finishing
products company focusing on the professional builder, remodel and repair
contractor, institutional buyer, and project-oriented consumer, today reported
operating results for the first quarter ended February 24, 2001.
Summary of Financial Highlights
(amounts in thousands except percentages and per share amounts)
First Quarter Ended
February 24, 2001 February 26, 2000
Net Sales $232,885 $347,113
Operating Loss* $(3,021) (1.3)% $(3,209) (0.9)%
Loss Before Income
Taxes $(12,869) (5.5)% $ (13,295) (3.8)%
Net Income/(Loss)** $279 0.1% $(4,218) (1.2)%
Net Income/(Loss)
Per Common Share $.01 $(.21)
Wtd. Avg. Shares
Outstanding 20,000 20,000
* Prior year includes $1.7 million decrease in operating loss due to
conversion from LIFO to FIFO-see attached
**First quarter 2001 includes a non-recurring and non-cash income tax
benefit of $8.0 million; the first quarter of 2000 included an income
tax benefit related to a capital loss carry-forward that positively
impacted net income by approximately $3.8 million-see attached
KEY DEVELOPMENTS - FIRST QUARTER 2001
-- SG&A expense reduced by 33.4% or $31.3 million vs. 1Q00.
-- First quarter SG&A ratio lowest Q1 reported since 1995.
-- Total debt reduction of $61.0 million vs. 1Q00 and $32.0 million vs.
Y/E 2000.
-- Net cash generated in Q1 of $32.4 million best reported since 1996.
-- Significant progress toward goal of profitability in 2001.
"Although this has been a very difficult winter quarter for our industry,
at PCI we continue to make significant progress in improving our profit model
and our balance sheet. The combination of a general economic slowdown, an
unusually harsh winter in most of our operating areas, further deflation in
commodity prices, and our continued transition away from frequent mass print
advertising events had a dramatic impact on our sales. However, our
relentless focus on margin maintenance, expense reduction, and debt reduction
while we aggressively concentrate on strengthening our relationship with our
target customer continues to deliver bottom line improvement."
-- President & CEO Millard Barron
First Quarter 2001 Results
Net income for the first quarter of 2001 was $0.3 million compared to a
net loss of $4.2 million in the first quarter of 2000. Net income in 2001 was
positively impacted by an $8.0 million ($.40 per share) non-recurring and
non-cash income tax benefit. The benefit resulted from an adjustment to
non-current deferred taxes prompted by settlements of numerous prior year
income tax examinations. The effective tax rate for the first quarter of 2000
benefited from the utilization of a long-term capital loss carry-forward,
which positively impacted net income by approximately $3.8 million or $.19 per
share for the quarter last year. Net income per common share in the first
quarter of 2001 was $.01 compared to a net loss of $.21 per common share in
the same quarter of 2000.
The Company reported a first quarter operating loss of $3.0 million
compared to an operating loss of $3.2 million in the first quarter of the
previous year. Lower selling, general, administrative and depreciation
expenses more than offset the shortfall in gross margin dollars resulting from
reduced sales volume.
Effective November 26, 2000, the Company changed its method of accounting
for its hardware store inventories from the last-in, first-out (LIFO) method
to the first-in, first-out (FIFO) method. As a result of the trend toward
declining unit costs of this merchandise, the Company believes that the new
method is preferable in the circumstances 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
products is the FIFO method, which remains unchanged. The financial
statements of prior periods have been restated to apply the new method
retroactively. As a result, gross margin and operating results for the period
ended February 26, 2000 have been increased $1.7 million to reflect the effect
of the new method of accounting. Net income for the quarter ended February
26, 2000 was positively impacted by $1.0 million or $.05 per share due to the
restatement.
Net sales for the first quarter of 2001 were $232.9 million, a 28.9%
same-store decrease and a 32.9% decrease in total, versus first quarter of
2000 sales of $347.1 million. On a same-store sales basis, sales to the
professional customer decreased 22.8%, and sales to the DIY customer decreased
36.9% for the quarter. Same store sales were negatively impacted by inclement
weather conditions in December, January and February, continuing deflation in
lumber prices, and reductions in mass advertising activity.
Payless Cashways Management Comments
Payless Cashways President & CEO Millard Barron commented, "Although this
has been a very difficult winter quarter for our industry, at PCI we continue
to make significant progress in improving our profit model and our balance
sheet. The combination of a general economic slowdown, an unusually harsh
winter in most of our operating areas, further deflation in commodity prices,
and our continued transition away from frequent mass print advertising events
had a dramatic impact on our sales. However, our relentless focus on margin
maintenance, expense reduction, and debt reduction while we aggressively
concentrate on strengthening our relationship with our target customer
continues to deliver bottom line improvement."
Mr. Barron continued, "Typically, the first quarter is a net loss quarter
for us due to the winter season. I am pleased with our overall bottom line
performance, and I remain conservatively optimistic about 2001. Although we
are still experiencing the negative impact of commodity price deflation, the
rate of deflation is declining as excess supply and capacity is reduced.
Also, falling interest rates should help, both by boosting consumer confidence
and reducing our significant interest costs. Finally, many of the initiatives
we undertook in 2000 to build our revenue, improve our efficiencies, and
reduce our debt, will continue to improve our profit leverage as we move
through the remaining quarters of the year. Two of our principal financial
objectives for 2001 are to be profitable and to reduce debt by $100 million.
In the first quarter, we made significant progress towards achieving both."
Mr. Barron concluded, "I am extremely proud of the dedication and hard
work of our associates during this challenging period. Of course, our vendor
and lender support continues to be key to our success, and we certainly
appreciate their continued partnering relationships. We also are committed to
continue to improve shareholder value, and appreciate the ongoing patience and
support of our shareholders."
About the Company
Payless Cashways, Inc. is a full-line building materials and finishing
products company focusing on the professional builder, remodel and repair
contractor, institutional buyer, and project-oriented consumer. The Company
operates 128 retail stores and 8 Builders Resource facilities in 17 states
located in the Midwestern, Southwestern, Pacific Coast and Rocky Mountain
areas. The Company also operates 12 distribution and manufacturing facilities
in 7 states. The stores operate under the names Payless Cashways, Furrow,
Lumberjack, Hugh M. Woods, Knox Lumber and Contractor Supply.
Forward-Looking Statements
This paragraph is included in this release to comply with 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. Investors are
cautioned that all forward-looking statements involve risk and uncertainty.
Among the factors that could cause results to differ materially are the
following: competitor activities; stability of customer demand; weather;
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; customer and product mix; growth of
certain market segments; an excess of retail space devoted to the sale of
building materials and the success of the Company's strategy, including
e-commerce opportunities. Additional information concerning these and other
factors is contained in the Company's SEC filings, which are available by
contacting the Company or on the Company's web site, payless.cashways.com .
PAYLESS CASHWAYS, INC.
First Quarter Ended February 24, 2001 (Unaudited) (a)
(In thousands, except percentages and per share amounts)
Thirteen Weeks Ended
February 24, 2001 February 26, 2000
Amount Percent Amount Percent
Net sales $232,885 100.0% $347,113 100.0%
Cost of merchandise
sold 166,952 71.7 248,027 71.4
Gross margin 65,933 28.3 99,086 28.6
Selling, general and
administrative 62,339 26.8 93,629 27.0
Provision for
depreciation and
amortization 6,957 3.0 8,936 2.5
Special charges --- --- 194 0.1
Other income (342) (0.2) (464) (0.1)
Operating Loss (3,021) (1.3) (3,209) (0.9)
Interest expense 9,848 4.2 10,086 2.9
Loss before income
taxes (12,869) (5.5) (13,295) (3.8)
Federal and state
income taxes (b) (13,148) (5.6) (9,077) (2.6)
NET INCOME/(LOSS) $279 0.1% $(4,218) (1.2)%
Net income/(loss)
per common share-basic $0.01 $(0.21)
Weighted average common
shares outstanding 20,000 20,000
(a) Effective November 26, 2000, the Company changed its method of
accounting for its hardware store 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 in the
circumstances because the FIFO method of valuing inventory more
closely matches current costs and revenues in periods of declining
prices. Accordingly, cost of merchandise sold for the period ended
February 26, 2000 has been decreased $1.7 million to reflect the
effect of applying retroactively the new method of accounting.
(b) Includes a non-recurring and non-cash tax benefit of $8.0 million
($.40 per share) relating to the settlement of numerous prior year
income tax examinations in the first quarter of fiscal 2001. The
effective tax rate for the first quarter of 2000 benefited from the
utilization of a long-term capital loss carry-forward, which
positively impacted net income by approximately $3.8 million or
$.19 per share.
PAYLESS CASHWAYS, INC.
Condensed Balance Sheets (Unaudited) (a)
(In thousands)
February 24, November 25,
February 26,
2001 2000 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $843 $1,485 $1,150
Merchandise inventories 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, NET 297,582 335,512 334,966
$639,118 $680,230 $746,092
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term
debt $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 331,348 363,432 402,345
NON-CURRENT LIABILITIES 40,265 50,596 57,962
STOCKHOLDERS' EQUITY
Common stock 200 200 200
Additional paid-in capital 183,600 183,600 183,600
Accumulated deficit (b) (49,107) (49,386) (32,737)
TOTAL STOCKHOLDERS' EQUITY (c) 134,693 134,414 151,063
$639,118 $680,230 $746,092
(a) Certain reclassifications have been made to the 2000 financial
statements to conform to the 2001 presentations.
(b) Effective November 26, 2000, the Company changed its method of
accounting for its hardware store 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 in the
circumstances because the FIFO method of valuing inventory more
closely matches current costs and revenues in periods of declining
prices. The financial statements of prior periods have been restated
to apply the new method retroactively. Accordingly, retained earnings
at November 25, 2000 and February 26, 2000 has been adjusted for the
effect (net of income taxes) of applying retroactively the new method
of accounting.
(c) The covenant included in the 1999 Credit agreement with Congress
Financial regarding minimum "adjusted net worth" 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.
SOURCE Payless Cashways, Inc.
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Related links:
http://payless.cashways.com
CONTACT:
Richard B. Witaszak, Sr. V.P., Finance and
CFO of Payless Cashways, Inc., 816-347-6974,
webinvestor@payless.cashways.com
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