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Archive for Tuesday, June 5, 2001

Payless Cashways files for Chapter 11

June 5, 2001

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— Payless Cashways Inc. announced Monday that it had filed for Chapter 11 bankruptcy reorganization.

The filing in U.S. Bankruptcy Court in Kansas City, Mo., follows the company's decision last month to lay off hundreds of employees and close 19 stores.

The Lee's Summit, Mo.-based company sells building materials and finishing products. Its business is aimed at remodelers, contractors, property management and industrial firms, and do-it-yourself customers.

The company has a 74,000-square-foot store and 4.5-acre yard at 3434 Iowa in Lawrence.

Millard Barron, the president and chief executive officer of Payless Cashways, blamed the company's financial troubles on poor economic conditions and an unusually harsh winter that led to lower than expected sales.

Barron also said lenders had constricted credit and vendors were getting their payments late. Shelves have not been fully stocked, leading to further declining sales, he said.

"We are extremely disappointed that we had to take this step," Barron said in a written statement.

"However, this convergence of negative factors forced us to take this drastic action on behalf of our customers. Our organization and our customers have been frustrated by the slow replenishment of merchandise at this important time of year. Our customers deserve the best service we can provide."

Barron said bankruptcy protection would allow the company to get supplies back into the stores.

"With these actions, simply having use of the revenues we generate daily will enable us to pay for all new merchandise delivered on a priority basis," Barron said.

Payless Cashways' latest financial problems come after emerging from a fast-track Chapter 11 bankruptcy reorganization filed in July 1997, when it had nearly 200 stores.

Since then, Barron said, the company has reduced its debt by about 30 percent.

"Over the last 3 1/2 years, we have made significant progress," Barron said.

Last fall, Payless began opening the Builders Resource Centers, which were designed to serve the company's favored customer the professional contractor.

The company has not said how many workers were put out of work because of last month's closings, but Payless averages 27 employees per store.

The Lawrence location was not affected by last month's layoffs, store manager Larry Hofmeier has said. It continues to have 40 full- and part-time employees.

The company now owns 110 traditional retail stores, five Builders Resource Centers down from eight last fall and one Contractor Supply store.

Shares of Payless Cashways closed Monday at 22 cents, down 74 cents, in trading on the New York Stock Exchange.

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