--------------------------------------------------------------------------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  -------------

                                    FORM 10-K

                                  ANNUAL REPORT
                       PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED JANUARY 29, 2000
                                  -------------
                         Commission File Number 1-10259

                                 HomeBase, Inc.
             (Exact name of Registrant as specified in its charter)


                 DELAWARE                                        33-0109661
(State or other jurisdiction of incorporation or              (I.R.S. Employer
                 organization)                               Identification No.)

           3345 Michelson Drive
                 Irvine, CA                                         92612
  (Address of principal executive offices)                        (Zip Code)

                                 (949) 442-5000
              (Registrant's telephone number, including area code)
                            ------------------------

           Securities registered pursuant to Section 12(b) of the Act:

                                                       Name of each exchange
        Title of each class                             on which registered
-------------------------------------              -----------------------------
    Common Stock, par value $.01                      New York Stock Exchange
  Preferred Share Purchase Rights                     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 the 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 voting stock held by  non-affiliates  of the
Registrant on April 3, 2000 was $77,111,731.

There were 37,603,148  shares of the Registrant's  Common Stock, $.01 par value,
outstanding as of April 3, 2000.

                       Documents Incorporated by Reference
Portions of the Proxy Statement for the Annual Meeting of Stockholders(Part III)
                            ------------------------

Exhibits to Form 10-K have been  included  only in copies of the Form 10-K filed
with the Securities and Exchange Commission.
--------------------------------------------------------------------------------



<PAGE>


                                     PART 1

Item 1.  Business

General

HomeBase(R),  Inc. ("the Company" or "HomeBase") is the second largest  operator
of home improvement  warehouse  stores in the western United States.  At January
29,  2000,  the Company  operated 88 stores in 10 states,  with plans to open an
additional  one to three  more  stores  during  the  current  fiscal  year.  The
Company's stores average  approximately  103,000 square feet of indoor space and
include up to 30,000 square feet of additional  exterior space for  full-service
garden  and  landscaping  centers.  The  Company  offers a broad  assortment  of
brand-name home  improvement and building supply products at competitive  prices
to  both  Do-It-Yourself   ("DIY")  and  professional   customers.   In  certain
categories,  the Company supplements its brand-name  offerings with high-quality
private label products.

The Company's goal is to be the  first-choice  destination  for shoppers of home
improvement  products  by  offering a broad  product  selection  at  competitive
prices,  with superior customer service.  By the end of April 1998, nearly every
store in the chain had been  remodeled  or opened  utilizing  an improved  store
design.  The store design  features a layout that is inviting and  attractive to
DIY shoppers while providing easy access areas for merchandise sold primarily to
contractors and other  professional  customers.  Companion products and services
are displayed  throughout the store to facilitate shopping for the complete home
improvement project.

The Company operates within a conventional 52 or 53 week accounting  fiscal year
that ends on the last  Saturday in January.  The 52 weeks ended January 29, 2000
and January 30, 1999 are referred to herein as "fiscal 1999" and "fiscal  1998,"
respectively.  The 53 weeks  ended  January  31,  1998 is  referred to herein as
"fiscal 1997."

The Company was  established  in 1989 when Zayre Corp.  (now The TJX  Companies,
Inc.) combined its BJ's Wholesale Club division  ("BJ's") and HomeBase  division
to form Waban Inc. ("Waban"),  and distributed all of Waban's outstanding common
stock to Zayre Corp. stockholders on a pro-rata basis.

On July  26,  1997,  Waban  transferred  all of the net  assets  of BJ's to BJ's
Wholesale  Club,  Inc.  ("BJI").  On July 28,  1997,  Waban  distributed  to its
stockholders,  on a pro-rata basis,  all of the outstanding  common stock of BJI
(the "Distribution").  In connection with the Distribution,  the Company changed
its name from Waban Inc. to HomeBase,  Inc. The Company and BJI are  independent
public companies, separately traded on the New York Stock Exchange.

Recent Developments

In  November  1999,  the  Company  announced  its  intention  to test a strategy
involving the creation of a new retail  concept that could serve as an expansion
vehicle.  In February  2000,  further  details were provided  regarding this new
strategic  direction.  It was announced that the new retail concept would have a
completely  independent  identity  from that of  HomeBase  stores,  including  a
different name and merchandising format. The product mix will address four broad
categories:
-Outdoor living,  including  patio,  barbecue,  nursery and  garden-related
 items.  This area will  represent  the  single  largest  percentage  of the
 store's selling space;
-Indoor  living,  including  flooring,  carpeting,  lighting,  storage  and
 selected  furniture;
-Home decor and  accessories,  from  kitchen and bath accessories  to linens and
 various  domestics  items;
-Seasonal  goods for Christmas and other holidays, as well as for entertaining.

The new concept is designed to expand upon  existing  businesses  that have been
consistently  strong performers within the current HomeBase stores and that hold
greater  potential in the new format.  In  addition,  the Company will enter new
areas of the home furnishings  market to bring together a unique  combination of
related specialty businesses into one shopping environment.

The Company  plans to  commence  in the second half of fiscal 2000 a  five-store
test of the new  concept  in  multiple  markets  that  encompass  a  variety  of
demographic,  geographic and climatic  considerations.  The test is estimated to
cost between $7 million and $8 million, net of income taxes.

Industry Outlook

The  Company  believes  that  demographic  and  lifestyle  factors,  such as the
maturing of baby boomers, the increase in home-centered activities, the increase
in home  ownership and the aging housing  stock,  will create growing demand for
home improvement and home furnishing products and services.

Home ownership is at record levels in the United States, up 67% since 1970. Home
renovations  are at an all-time high,  having  increased 74% over the last seven
years.  Homeowners  are likely to spend more to maintain and improve their homes
than renters.

Since the mid 1980's,  warehouse-format  home improvement  retailers have gained
significant market share in the United States by offering lower prices,  greater
product  selection and more in-stock  merchandise than traditional home centers,
hardware and lumber yard operators. In addition,  warehouse store operators have
been  able to take  advantage  of  economies  of scale  created  by large  sales
volumes.  Although the home  improvement  industry  remains  fragmented,  it has
experienced increasing  consolidation in recent years. The Company believes this
trend will continue and intends to capitalize on this momentum by continuing its
strategy of promoting a service-oriented  shopping  experience in a store format
that has an attractive ambiance and a customer-friendly layout.

Customer Service

The Company is  committed  to  providing  superior  service to its two  targeted
customer groups. At each store, carefully selected home improvement specialists,
who  have  extensive  experience  in  their  respective  fields,  are  available
throughout the store to assist DIY and professional customers. Nearly all of the
Company's  stores  also  offer  the  services  of  professional  ASID  certified
designers  who provide free  consultations  in customers'  homes.  The Company's
project and design  centers  feature  computer  aided design  ("CAD") tools that
allow  customers  to  work  with  design  coordinators  in the  store  or in the
convenience  of their own  homes,  to  conceptualize  and plan a variety of home
improvement projects.  This service builds customer excitement and confidence in
their decision to select HomeBase for these important home improvement projects.

The  Company  believes  that it is  important  to expand  its DIY  business  and
believes it can do so by providing encouragement and skill-enhancement  programs
for new and existing DIY customers. Accordingly, the Company provides assistance
and training to DIY customers, including regularly scheduled customer clinics on
a wide range of home  improvement  projects.  The Company  also offers  "How-To"
brochures  that can be found on its  website at  www.homebase.com.  Installation
services are  available  for over 100 product  categories,  utilizing  carefully
screened professional  contractors who must be highly recommended,  licensed and
bonded. This installation program has solidified  relationships with many of the
Company's best professional  customers.  Delivery and assembly services are also
available for the convenience of customers.

The Company's stores also offer services that specifically  address the needs of
professional customers. Nearly all of the Company's stores have Contractor Desks
with staff  dedicated to handling  contractors'  special  needs,  including  the
ability to receive  faxed  orders  and stage  them for  pick-up,  and to quickly
obtain special items and sizes. Bulk purchases can be delivered to job sites for
a nominal  fee.  To better  serve the needs of the  professional  customer,  the
Company's stores have early and extended hours of operations.

In addition to accepting  all major  credit  cards,  the Company  offers its own
private label credit card to DIY and professional customers under a non-recourse
program operated by a major financial institution.  The utilization of this card
offers  convenience to a customer and, more importantly,  reinforces the pattern
for repeat purchases at HomeBase stores.

Team Members

In support of its commitment to customer service, the Company seeks to hire only
the very best team  members.  Each store has  skilled  tradespeople  who combine
extensive  career  experience  with in-house  education  programs to ensure that
customers will have access to  knowledgeable  and courteous  sales staff who can
assist  them with their home  improvement  questions  and  projects.  All of the
Company's sales team members receive extensive  training through a comprehensive
in-house training program that combines on-the-job training with formal seminars
and  meetings to emphasize  the  importance  of customer  service and to further
develop team member selling skills. In-house training includes periodic sessions
conducted by the Company's training staff or by manufacturers'  representatives,
as well as frequent meetings with store managers,  which provide sales training,
product updates and other information.

As of January  29,  2000,  the  Company had  approximately  9,400 team  members,
including approximately 550 who are engaged in various corporate  administration
and store support  functions.  Of the Company's total  personnel,  approximately
3,300 are  considered  part-time  (working  fewer than 33 hours per  week).  The
number of team members employed fluctuates, depending on the selling season, and
is typically higher during the second and third quarters, which include the most
active seasons for home improvement sales. None of the Company's team members is
a member of a union.  The Company  considers its relations with its team members
to be excellent.

Merchandising

With 14 departments offering broad categories of home improvement and decorative
goods,  each HomeBase store  regularly  stocks over 30,000 brand name or private
label items and offers thousands of special order products.  Special  promotions
of brand name  products are  regularly  featured as "Base  Buys," which  provide
customers additional savings  opportunities.  In select categories,  the Company
supplements  brand name  offerings  with  high-quality  private label  products,
including the Infinity(R)  line of paint,  the Galleria(R) and Galleria  Gold(R)
lines of  fashion  lighting,  and the  PowerBuilt(R)  brand of hand  tools.  The
Company  continually  evaluates its product mix for opportunities to add new and
exciting products in every aisle of the store to meet the ever-changing needs of
both DIY and professional customers.

The table  below sets  forth the  Company's  percentage  of net sales by product
categories for fiscal 1999 and 1998:

<TABLE>
<CAPTION>
Product Category                                         1999          1998
----------------                                     ------------- -------------

<S>                                                        <C>           <C>
Building Materials and Lumber                              23%           23%
Electrical and Plumbing                                    17            18
Paint and Decor                                            19            18
Garden, Nursery and Seasonal                               16            16
Hardware and Tools                                         13            13
Project and Kitchen Design Center                          12            12
                                                     ------------- -------------

     Total                                                100%          100%
                                                     ============= =============
</TABLE>

HomeBase has a  centralized  purchasing  function  located  within its Corporate
Support Center.  The Company maximizes its distribution  efficiencies  through a
combination  of  direct  shipments  from  vendors  to the  stores  and  from its
675,000-square-foot  consolidation  and distribution  center located in Ontario,
California.

Seasonality

The Company's  sales and earnings have  typically  been higher in the second and
third  quarters of the fiscal year,  which  include the most active  seasons for
home  building and other  improvements.  Sales and earnings can also be impacted
favorably or adversely as a result of prevailing regional weather patterns.

Marketing and Advertising

The Company  addresses its primary target customers  through a mix of newspaper,
direct mail, radio and television advertising. The primary advertising medium is
newspaper advertisements through freestanding inserts.  Television and radio are
used to reinforce the Company's image of providing superior customer service and
a broad  assortment of  merchandise  at competitive  prices.  Additionally,  the
Company  participates  in or hosts a variety of home  improvement  trade  shows,
supplier   conferences  and  contractor  product  shows.   Through  co-operative
advertising agreements, vendors participate in many of the Company's advertising
programs.

Management Information Systems

The Company regularly assesses and upgrades its management  information  systems
("MIS") to monitor  sales,  track  inventory and provide  rapid  feedback on the
performance  of its  business.  Advanced  frame  relay  communications  systems,
advanced inventory tracking and ordering,  and in-store computer design tools to
help  customers  with their  remodeling  projects are examples of the  Company's
commitment to technology.

In  February  2000,  the  Company  completed  a  conversion  to  a  new,  client
server-based multi-level merchandising system that allows for improved inventory
replenishment  and inventory  management.  During the next two fiscal years, the
Company  expects to select and complete  the  implementation  of new  financial,
payroll and human resource software applications.

The Company completed the  implementation of a new Point-Of-Sale  ("POS") system
in February  1999.  The new POS system  enables the Company to more  effectively
record its sales  information  and to better  support  merchandising,  inventory
replenishment  and  promotional  decisions.  In addition to internal  efficiency
improvements, an important benefit of this investment is better customer service
due to cashier ease of use, which helps assure faster check-out lines.

Competition

The home  improvement  retailing  business  is highly  competitive.  The Company
competes  with a variety  of  wholesalers  and  retailers,  including  two large
national  chains  that  use  the  home   improvement   warehouse  store  format.
Competition  principally exists in the areas of customer service, price, product
selection, store location and name recognition.

HomeBase is the second largest operator of home improvement  warehouse stores in
the western United States.  Due to the large number and variety of  competitors,
management  is unable to  precisely  measure the  Company's  market share in its
existing market areas. The Company believes it has an advantage over many of its
traditional  home center  competitors  with its strong  brand name  recognition,
customer  loyalty,  level  of  customer  service,  competitive  prices  and  the
opportunity  for one-stop  shopping  through its full range of home  improvement
products.

During fiscal 1999,  the nation's  second largest  retailer of home  improvement
products  affirmed its intentions for a major  expansion into the western United
States. We believe they anticipate opening in excess of 100 locations by the end
of 2003.

Item 2. Properties

As of January 29, 2000, the Company  operated 88 stores,  of which 70 are leased
under long-term leases and 18 are owned. The unexpired terms of the leases range
from  approximately  two to 20 years,  and average  approximately  10 years. The
Company  has  options  to renew all of its leases  for  periods  that range from
approximately  5 to 25 years and average  approximately  18 years.  These leases
require fixed monthly rental payments, which are subject to various adjustments.
In addition, certain leases require payment of a percentage of the store's gross
sales in excess of certain  amounts.  The Company also remains  obligated  under
leases for four  additional  stores that have been closed.  Most leases  require
that  the  Company  pay all  property  taxes,  insurance,  utilities  and  other
operating costs of the store.

The following table sets forth the number and location of the Company's stores:

<TABLE>
<CAPTION>
         -----------------------------------------------------------------------
                                                              Number of
              State                                            Stores
         -----------------------------------------------------------------------
              <S>                                                 <C>
              California                                          50
              Washington                                           9
              Colorado                                             7
              Arizona                                              6
              Oregon                                               4
              Nevada                                               3
              New Mexico                                           3
              Utah                                                 3
              Texas                                                2
              Idaho                                                1
         -----------------------------------------------------------------------

              Total                                               88
         =======================================================================
</TABLE>

The average size of the Company's 88 stores in operation at January 29, 2000 was
approximately  103,000 square feet.  Most of the Company's  stores utilize up to
30,000 square feet of additional  exterior selling space for full-service garden
and landscaping  centers. The Company's stores are located in both free-standing
locations and shopping  centers.  In some  locations,  a HomeBase store shares a
center with a membership warehouse club or another large retailer.

Including space for parking,  a typical new HomeBase store requires eight to ten
acres of land.  Construction and site development costs for a new HomeBase store
average  approximately $5.0 million, land acquisition costs generally range from
$2.0 million to $9.0 million,  and the initial  capital  investment for fixtures
and  equipment  averages  approximately  $2.0  million.  In  addition to capital
expenditures,  each new store  requires  an  investment  of  approximately  $3.0
million for inventory (net of accounts payable) and pre-opening expenses.

The Company's Corporate Support Center, located in Irvine, California,  occupies
164,000 square feet under a lease expiring July 24, 2004, with options to extend
the lease through July 24, 2019.

Item 3. Legal Proceedings

The Company is involved in various legal  proceedings  incident to the nature of
its  business.  Although  it is not  possible  to predict  the  outcome of these
proceedings,  or any claims  against the Company  related  thereto,  the Company
believes that such proceedings will not, individually or in the aggregate,  have
a  material  adverse  effect on either  its  financial  condition  or results of
operations.


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

No matters were submitted to a vote of the Company's security holders during the
fourth quarter of fiscal 1999.


<PAGE>


Executive Officers of the Registrant

Pursuant  to  General  Instruction  G(3) of Form  10-K,  the  following  list is
included  as an  unnumbered  item  in  Part I of this  Report  in lieu of  being
included in the Proxy  Statement for the Annual  Meeting of  Stockholders  to be
held on June 1, 2000.

The  following is a list of names and ages of all of the  executive  officers of
the registrant  indicating all positions and offices with the registrant held by
each such person and each person's  principal  occupations or employment  during
the past five years.

<TABLE>
<CAPTION>
---------------------------- ------ ------------------------------------------------------------------------
                                                     Office and Employment Experience
Name                          Age                           During Last Five Years
---------------------------- ------ ------------------------------------------------------------------------

<S>                            <C>  <C>
Herbert J. Zarkin              61   President,  Chief  Executive  Officer of the Company  since March 2000.
                                    Chairman  of the Board of the Company  since July 1997 and  Director of
                                    the Company since May 1993.  President,  Chief Executive Officer of the
                                    Company (May 1993 - July 1997).

Thomas F. Gallagher            48   Executive Vice President,  Store Operations since July 1997;  Executive
                                    Vice  President,  Store  Operations  of the HomeBase  division  (1996 -
                                    1997); Vice President, Sales Operations of BJ's (1993 - 1996).

William B. Langsdorf           43   Executive Vice President and Chief  Financial  Officer since July 1997;
                                    Senior Vice President, Finance of the HomeBase division (1993 - 1997).

Scott L. Richards              42   Executive  Vice  President,  Merchandising  since July 1997;  Executive
                                    Vice President,  Merchandising of the HomeBase  division (1996 - 1997);
                                    Vice President, Merchandising of the HomeBase division (1993 - 1996).

John L. Price                  49   Vice  President,   General  Counsel  and  Secretary  since  July  1997;
                                    Assistant  General  Counsel of 20th  Century
                                    Industries  (1995  -  1997);  private  legal
                                    practice (1991 - 1995).

---------------------------- ------ ------------------------------------------------------------------------
</TABLE>


<PAGE>


                                     PART II

Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters

The common stock of HomeBase(R),  Inc. (the "Company) is listed on the New York
Stock Exchange  (symbol HBI). The following are the quarterly high and low stock
prices for the fiscal years ended January 29, 2000 and January 30, 1999:

<TABLE>
<CAPTION>
--------------------------------------- --------------------------------- ----------------------------------
                                               Fiscal Year Ended                  Fiscal Year Ended
Quarters                                        January 29, 2000                  January 30, 1999
--------------------------------------- --------------------------------- ----------------------------------

<S>                                           <C>             <C>              <C>              <C>
                                              High            Low               High            Low

First                                         6 3/4           4 1/16            8 7/8           6 9/16
Second                                        6 15/16         4 7/8            10 1/8           7 5/8
Third                                         5 7/8           3 9/16            7 13/16         5 1/4
Fourth                                        4               2 7/8             7 5/8           5
--------------------------------------- ---------------- ---------------- ---------------- -----------------
</TABLE>


The number of stockholders of record at April 3, 2000 was 3,229.

The Company has never paid or declared a cash  dividend and the Company does not
presently intend to pay or declare any cash dividends on its common stock in the
future.  The  Senior  Bank  Facility  does not  permit  the  Company to pay cash
dividends.


<PAGE>


Item 6. Selected Financial Data

               SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following selected consolidated  financial and operating data of the Company
for each of the five  fiscal  years in the period  ended  January  29,  2000 are
extracted or derived from the audited Consolidated Financial Statements, and the
notes thereto, of the Company, which have been audited by PricewaterhouseCoopers
LLP, independent accountants.  The selected consolidated financial and operating
data set forth below should be read in conjunction with "Management's Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations"  and  the
Consolidated Financial Statements and the notes thereto.
<TABLE>
<CAPTION>
                                                                                   Fiscal Year Ended
--------------------------------------------------------------------------------------------------------------------------------
                                                           January 29,  January 30,    January 31,   January 25,  January 27,
(Dollars in thousands, except per share data)                 2000          1999           1998         1997          1996
--------------------------------------------------------------------------------------------------------------------------------
                                                                                       (53 Weeks)
Income Statement Data:
<S>                                                         <C>          <C>           <C>          <C>          <C>
  Net sales                                                 $1,525,275   $1,442,341    $1,477,442   $ 1,452,696  $ 1,448,776

  Cost of sales, including buying and occupancy costs        1,196,465    1,124,250     1,159,253     1,136,997    1,124,460
--------------------------------------------------------------------------------------------------------------------------------
  Gross profit                                                 328,810      318,091       318,189       315,699      324,316

  Selling, general and administrative expenses                 304,457      278,232       285,773       273,440      272,808
  Pre-opening expenses                                           3,726          919         1,408         4,401        2,847
  Store closures and other charges                                   -            -        27,000             -            -
--------------------------------------------------------------------------------------------------------------------------------
  Operating income                                              20,627       38,940         4,008        37,858       48,661

  Interest on debt and capital leases (net)                      3,440        2,817         5,136        10,506        8,790
--------------------------------------------------------------------------------------------------------------------------------
  Income (loss) from continuing operations before income
    taxes and extraordinary gain (loss)                         17,187       36,123        (1,128)       27,352       39,871

  Provision (benefit) for income taxes                           6,358       13,760          (445)       11,005       15,386
--------------------------------------------------------------------------------------------------------------------------------
  Income (loss) from continuing operations before
    extraordinary gain (loss)                                   10,829       22,363          (683)       16,347       24,485

  Income from discontinued operations, net of income taxes           -            -        20,575        60,313       48,492

  Extraordinary gain (loss) on early extinquishment of
    debt, net of income tax provision (benefit)                  1,799            -        (8,663)            -            -
--------------------------------------------------------------------------------------------------------------------------------

  Net income                                                 $  12,628    $  22,363     $  11,229    $   76,660    $  72,977
================================================================================================================================

Basic net income (loss) per share (1):
  Income (loss) from continuing operations before
    extraordinary gain (loss)                                $    0.28    $    0.59     $   (0.02)   $     0.50    $    0.74
  Income from discontinued operations                                -            -          0.57          1.83         1.47
  Extraordinary gain (loss)                                       0.05            -         (0.24)            -            -
--------------------------------------------------------------------------------------------------------------------------------

  Net income                                                 $     0.33   $    0.59     $    0.31    $     2.33    $    2.21
================================================================================================================================

Diluted net income (loss) per share (1):
  Income (loss) from continuing operations before
     extraordinary gain (loss)                               $     0.28   $     0.54    $    (0.02)  $      0.49   $    0.74
  Income from discontinued operations                                 -            -          0.57          1.82        1.46
  Extraordinary gain (loss)                                        0.05            -         (0.24)           -            -
--------------------------------------------------------------------------------------------------------------------------------

  Net income                                                 $     0.33   $     0.54    $     0.31   $      2.31   $    2.20
================================================================================================================================

Shares used in computation of net income (loss) per share:
  (In thousands)
    Basic                                                        37,849       37,845        35,770        32,839      33,014
    Diluted                                                      37,936       48,013        35,770        33,205      33,220

Balance Sheet Data:
Working capital                                              $  267,698   $  261,930    $  240,828   $   275,842   $ 265,450
Net assets of discontinued operations (2)                             -            -             -       423,688     403,713
Total assets                                                    727,742      728,982       715,608     1,077,059   1,066,188
Long-term debt and obligations under capital leases             100,749      115,659       115,963       242,548     255,803
Stockholders' equity                                            394,686      382,499       359,667       631,925     555,120

Stores open at end of period                                         88           84            83            84          79
================================================================================================================================
</TABLE>

(1)  The Company adopted  Statement of Financial  Accounting  Standards No. 128,
     "Earnings per Share" ("SFAS No. 128") in fiscal 1997. Net income (loss) per
     share  amounts for all periods  prior to fiscal 1997 have been  restated to
     conform to the SFAS No. 128 requirements.
(2)  On July 26, 1997, the Company transferred all of the net assets of BJ's to
     BJI and on July 28, 1997, the Company completed the Distribution.


<PAGE>


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Results of Operations

Organization and Presentation

The Company operates within a conventional 52 or 53 week accounting  fiscal year
which ends on the last Saturday in January.  The 52 weeks ended January 29, 2000
is referred to herein as "fiscal 1999".  The 52 weeks ended January 30, 1999 and
the 53 weeks ended  January 31, 1998 are referred to herein as "fiscal 1998" and
"fiscal 1997", respectively.

On July 26, 1997, HomeBase, Inc. (the "Company"),  formerly known as Waban Inc.,
transferred  all of the net assets of its BJ's Wholesale Club division  ("BJ's")
to BJ's Wholesale Club, Inc. ("BJI").  On July 28, 1997, the Company distributed
to its stockholders, on a pro-rata basis, all of the outstanding common stock of
BJI (the "Distribution").  The financial statements for the periods prior to the
Distribution  have been  restated to present BJ's as a  discontinued  operation.
Income from discontinued  operations for fiscal 1997 includes  transaction costs
of $5.0 million (net of tax) incurred in connection with the  Distribution.  The
following  discussion  pertains to the  continuing  operations  of the  Company,
unless otherwise noted.

The following table presents the results of operations for the periods indicated
as a percentage of net sales.

<TABLE>
<CAPTION>
                                                                      Fiscal Year Ended
----------------------------------------------------------------------------------------------------------
                                                        January 29,      January 30,      January 31,
                                                           2000              1999             1998
----------------------------------------------------------------------------------------------------------

<S>                                                            <C>               <C>              <C>
Net sales                                                      100.0%            100.0%           100.0%

Cost of sales, including buying and occupancy costs             78.4              77.9             78.5
----------------------------------------------------------------------------------------------------------
Gross profit                                                    21.6              22.1             21.5

Selling, general and administrative expenses                    20.1              19.3             19.3
Pre-opening expenses                                             0.2               0.1              0.1
Store closures and other charges                                   -                 -              1.8
----------------------------------------------------------------------------------------------------------
Operating income                                                 1.3               2.7              0.3

Interest on debt and capital leases (net)                        0.2               0.2              0.3
----------------------------------------------------------------------------------------------------------
Income from continuing operations before
   income taxes and extraordinary gain (loss)                    1.1               2.5                -

Provision for income taxes                                       0.4               0.9                -
----------------------------------------------------------------------------------------------------------
Income from continuing operations before
   extraordinary gain (loss)                                     0.7               1.6                -

Income from discontinued operations, net of
   income taxes                                                    -                 -              1.4
----------------------------------------------------------------------------------------------------------
Income before extraordinary gain (loss)                          0.7               1.6              1.4

Extraordinary gain (loss) on early extinguishment of
   debt, net of income taxes                                     0.1                 -             (0.6)
----------------------------------------------------------------------------------------------------------

Net income                                                       0.8%              1.6%             0.8%
==========================================================================================================
</TABLE>


Fiscal Year Ended January 29, 2000 (Fiscal  1999)  Compared to Fiscal Year Ended
January 30, 1999 (Fiscal 1998)

Net Sales

Net sales for fiscal 1999  increased  5.7% to  $1,525.3  million  from  $1,442.3
million in fiscal  1998.  The increase was driven,  in part,  by the  previously
announced sales initiatives and by contributions from 5 new stores opened during
fiscal  1999.  Comparable  store  sales grew 1.4%,  the result of an increase in
average  ticket  that  was  partially  offset  by a  decline  in the  number  of
transactions.

Gross Profit

Gross profit was 21.6% of net sales in fiscal 1999 versus 22.1% for fiscal 1998.
The sales mix in fiscal 1999  reflected  a larger  proportion  of lumber  sales,
which  generally  have a lower gross  profit than does the overall mix of goods.
During the second half of fiscal 1999, the Company saw a return to a more normal
seasonal  mix of  sales,  with a larger  portion  of  sales  in the home  decor,
seasonal and patio categories.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") were 20.1% of net sales in
fiscal 1999 versus  19.3% in fiscal 1998.  The current  year's  results  include
additional  costs  related  to the  Company's  sales  initiatives  that  include
increased store payroll costs and approximately $1.0 million in costs associated
with the development of the new retail  concept.  Fiscal 1998 included a pre-tax
charge  of $1.1  million  associated  with the  termination  of the  Waban  Inc.
Retirement Plan.

Pre-opening Expenses

Store pre-opening  expenses were $3.7 million in fiscal 1999 versus $0.9 million
in fiscal  1998.  The  increase is  attributable  to the opening of one store in
March 1999, three stores in May 1999 and one store in October 1999, whereas only
one store opened in fiscal 1998.

Interest on Debt and Capital Leases, Net

Interest  on debt and  capital  leases,  net,  was $3.4  million in fiscal  1999
compared to $2.8 million in fiscal 1998.  Interest on debt and capital leases is
presented net of interest and investment income of $4.7 million and $4.9 million
in fiscal 1999 and 1998, respectively.

Income Tax Provision

The income tax rate for income from  continuing  operations  was 37.0% in fiscal
1999 compared to 38.1% in fiscal 1998. The decrease in the tax provision rate in
fiscal 1999 was primarily attributable to the realization of certain federal tax
credits and  interest  income from  municipal  bond  investments  not subject to
federal income taxation.  For fiscal 2000, the Company expects the tax provision
rate to be between 37% and 38%.

Income (Loss) From Continuing Operations Before Extraordinary Gain (Loss)

Income (loss) from continuing  operations before  extraordinary  gain (loss) for
fiscal 1999 was $10.8 million,  or $0.28 per share,  diluted,  compared to $22.4
million, or $0.54 per share, diluted, in fiscal 1998.

Net Income

Net income  for  fiscal  1999 was $12.6  million,  or $0.33 per share,  diluted,
compared to $22.4  million,  or $0.54 per share,  diluted,  in fiscal 1998.  Net
income for fiscal 1999 includes an extraordinary after-tax gain of $1.8 million,
or $0.05 per share,  diluted,  associated  with the Company's  repurchase of its
convertible  notes.  The  decrease  in net income for fiscal 1999 from the prior
year was primarily the result of increased spending for store payroll as part of
the Company's sales  initiatives,  as well as $3.7 million in store  pre-opening
expenses,  partially offset by the extraordinary after-tax gain of $1.8 million.
Fiscal 1999 results also included  pre-tax costs of  approximately  $1.0 million
associated with the  development of the new retail concept.  Fiscal 1998 results
included a pre-tax charge of $1.1 million for the  termination of the Waban Inc.
Retirement  Plan  and  $4.0  million  of  incremental  costs  related  to  store
remodeling.


Fiscal Year Ended January 30, 1999 (Fiscal  1998)  Compared to Fiscal Year Ended
January 31, 1998 (Fiscal 1997)

Net Sales

Fiscal 1998 consisted of 52 weeks compared to 53 weeks in fiscal 1997. Net sales
for fiscal 1998  decreased  2.4% to $1,442.3  million from  $1,477.4  million in
fiscal 1997,  due to one less sales week in fiscal 1998.  The sales decrease was
also the result of disruption  caused by store remodel  construction  during the
first quarter of fiscal 1998 and increased competition in many of the markets in
which the Company  operates.  In addition,  the Company had one fewer store open
during most of fiscal 1998 compared to the prior year.  Same store sales for the
comparable  52  weeks  declined  0.5%  in  fiscal  1998,  primarily  due  to the
disruption  caused by store  remodel  construction  during the first  quarter of
fiscal  1998 and  increased  competition  in many of the  markets  in which  the
Company operates.

Gross Profit

Gross profit increased to 22.1% of net sales in fiscal 1998 compared to 21.5% in
fiscal 1997. The  improvement was due to a number of factors,  including  higher
average  selling  margins  caused  by a change in the mix of  products  sold and
continuing buying efficiencies.

Selling, General and Administrative Expenses

Selling,  general and administrative expenses ("SG&A") was 19.3% of net sales in
both fiscal 1998 and fiscal 1997.

Higher  expenses  of $4.0  million  related  to  store  remodeling  and  pre-tax
settlement  costs of $1.1 million  associated  with the termination of the Waban
Inc. Retirement Plan in fiscal 1998 were offset primarily by favorable trends in
self-insurance expenses.

Pre-opening Expenses

Store pre-opening  expenses were $0.9 million in fiscal 1998 versus $1.4 million
in fiscal  1997.  The  decrease is  attributable  to the opening of one store in
fiscal 1998 versus two stores in the prior year.

Interest on Debt and Capital Leases, Net

Interest  on debt and  capital  leases,  net,  was $2.8  million in fiscal  1998
compared to $5.1 million in fiscal 1997.  Interest on debt and capital leases is
presented net of interest and investment income of $4.9 million and $2.6 million
in fiscal 1998 and 1997,  respectively.  Interest income increased due to higher
average  marketable  securities  balances  in fiscal  1998 as compared to fiscal
1997.

Income Tax Provision (Benefit)

The income tax rate for income (loss) from  continuing  operations  was 38.1% in
fiscal 1998 compared to 39.5% in fiscal 1997.  The decrease in the tax provision
rate in fiscal 1998 was primarily  attributable  to the  realization  of certain
state tax credits.

Income (Loss) From Continuing Operations Before Extraordinary Loss

Income (loss) from continuing  operations before  extraordinary  loss for fiscal
1998 was $22.4 million, or $0.54 per share, diluted,  compared to a loss of $0.7
million, or $0.02 per share,  diluted, in fiscal 1997.  Excluding store closures
and other charges,  income from continuing  operations for fiscal 1997 was $15.6
million, or $0.44 per share, diluted.

Net Income

Net  income  in fiscal  1998 was $22.4  million,  or $0.54 per  share,  diluted,
compared to $11.2  million,  or $0.31 per share,  diluted,  in fiscal 1997.  Net
income for fiscal  1997  includes  $20.6  million  in income  from  discontinued
operations for periods prior to the Distribution  and an  extraordinary  loss of
$8.7   million,   net  of  income  tax  benefit,   associated   with  the  early
extinguishment of debt recorded in July 1997.


Liquidity and Capital Resources

Cash flows from  operating  activities  provide the Company  with a  significant
source of liquidity.  Additionally, the Company raised capital in 1997 through a
$100 million convertible debt offering and also has up to $250 million available
from a revolving credit facility, based upon eligible collateral,  for corporate
growth and working capital purposes.

At January 29, 2000, the Company had $41.8 million in cash, cash equivalents and
marketable  securities.  Also at that date,  there were no borrowings  under the
Company's $250 million revolving credit facility.  Letters of credit outstanding
as of January 29, 2000 were $15.3 million.

On December 3, 1999,  the Company  entered  into a new  five-year,  $250 million
revolving line of credit that replaced the previous $105 million credit line and
provides  the Company with greater  financial  flexibility  to pursue its growth
objectives.  Borrowings under the new credit line are collateralized by eligible
inventory and accounts receivable.  The Company paid a one-time underwriting fee
of 0.85% and is required to pay an unused line fee of 0.375% annually.  Interest
on borrowings  will be calculated  based on the LIBOR rate,  plus a 1.5% to 2.0%
margin.  The new credit line is subject to certain  financial  covenants  should
excess availability under the line fall below $40 million.

On November  16,  1999,  the Company  announced  several  important  initiatives
intended to build  shareholder  value.  These  included a securities  repurchase
program and an initiative to develop a new retail concept that could serve as an
expansion vehicle. It is envisioned that the new retail concept could provide an
opportunity to the Company to have a more dominant  position  within some of the
existing key categories in which the Company now operates,  as well as allow for
entry into new,  related  businesses  in which the  Company  does not  currently
participate. A five-store test of the new concept is expected to commence in the
second  half of fiscal  2000 at an  estimated  cost  between $7  million  and $8
million, net of income taxes.

As announced in November 1999, the board of directors has authorized the Company
to spend up to $20  million  to  repurchase  HomeBase  common  stock  and  5.25%
convertible  subordinated  notes  periodically  in the open  market,  as  market
conditions  warrant. As of January 29, 2000, the Company had repurchased 270,400
shares of common stock at an average price of $3.00 per share,  and $7.6 million
in face value of convertible notes for $4.6 million.  The repurchase  program is
authorized to extend through December 31, 2001.

In light of the decision to pursue a new retail  concept and the need to further
refine the strategies for existing  HomeBase  stores,  the Company now estimates
opening one to three new stores during fiscal 2000.

The Company believes that its current resources,  cash flows from operations and
amounts  available  under its  revolving  credit  facility will be sufficient to
support  its  growth  plans and  related  strategic  initiatives  and to finance
operations through January 27, 2001.

Restructuring Reserve

As of January 30,  1999,  $5.9 million of the fiscal 1993  restructuring  charge
remained  accrued on the Company's  consolidated  balance  sheet.  During fiscal
1999, the Company incurred cash  expenditures of $2.5 million  primarily related
to lease  obligations on closed facilities and costs associated with the closure
in  July  of  an  older,   under-performing  store.  In  addition,  the  Company
reevaluated its  Restructuring  and Closed Store Reserves and determined that an
additional  $3.3 million was required in the  Restructuring  Reserve to meet its
lease  obligations.  At year end,  the $3.3  million was  reclassified  from the
Closed Store Reserve to the Restructuring  Reserve. As of January 29, 2000, $6.8
million remained accrued on the Company's consolidated balance sheet, consisting
primarily of lease obligations on closed facilities, which extend through 2007.

Recent Accounting Standards

Effective   January  30,  1999,  the  Company  adopted  Statement  of  Financial
Accounting  Standards ("SFAS") No. 132,  "Employers'  Disclosures about Pensions
and Other  Post-Retirement  Benefits".  The  provisions  of SFAS No. 132 revises
employers'  disclosures about pension and other  post-retirement  benefit plans.
SFAS No. 132 does not change the measurement or recognition of these plans,  and
standardizes the disclosure  requirements for pensions and other post-retirement
benefits to the extent practicable.

SFAS   No.   137,   "Accounting   for   Derivative   Instruments   and   Hedging
Activities-Deferral  of the  Effective  Date  of  FASB  Statement  No.  133  (an
amendment of FASB  Statement  No. 133)"  establishes  accounting  and  reporting
standards for derivative instruments and for hedging activities. It is effective
for all fiscal  quarters of fiscal  years  beginning  after June 15,  2000.  The
Company  currently does not invest in any derivative  financial  instruments and
does not currently employ any hedging activities.

Year 2000

The Company  used  internal and  external  resources  to remediate  and test its
systems. Costs incurred in addressing the Year 2000 (Y2K) issue were expensed as
incurred and were not material to the Company's  financial results.  The Company
did not experience any  significant  malfunctions  or errors in its operating or
business  systems when the date changed from 1999 to 2000.  Based on  operations
since January 1, 2000, the Company does not expect any significant impact to its
ongoing business as a result of the Y2K issue.  However, it is possible that the
full  impact of the date  change  has not been  fully  recognized.  The  Company
currently  is not aware of any  significant  Y2K or similar  problems  that have
arisen for its customers and suppliers.

Risk Factors

If we cannot  develop and test our new retail concept  successfully,  we may not
have a new expansion vehicle, and our operating results could be harmed.

In November  1999, we announced  our intent to create a new retail  concept that
could  serve as an  expansion  vehicle.  The new  retail  concept  would  have a
completely independent identity from our HomeBase stores, with a different name,
merchandising  format and product mix. We plan to start a five-store test of the
new concept in the second half of fiscal 2000, costing between $7 million and $8
million after taxes. If we cannot successfully develop and test the concept, the
cost of the  test  may harm  our  operating  results,  and we may not have a new
expansion  vehicle  to grow our  operating  results  and  counteract  the  other
pressures on our business.

More competition could harm our operating results.

The home improvement,  hardware and garden businesses are highly competitive. We
compete with a large number and variety of wholesalers and retailers,  including
two  large  national  chains  in the home  improvement  warehouse  merchandising
business which have significantly greater financial and marketing resources than
we do. The Home Depot, Inc. and Lowe's Companies, Inc. are our major competitors
that use the warehouse store format.

Competition is most intense in the areas of price, product selection,  location,
service and name recognition. Competitive factors could require price reductions
or cause an increase in operating costs, including increases in expenditures for
marketing and customer service, that would harm our operating results.

Some of the markets in which we now operate, or in which we might operate in the
future,  may  already  be at or near  the  saturation  point  in  terms  of home
improvement  stores.  Some of our major competitors appear to have a strategy of
clustering  stores within, or saturating,  markets in which they operate,  or of
placing their warehouse  stores so close to our stores as to directly  challenge
our  competitive  position  in  such  markets.  These  strategies  of our  major
competitors  could  harm our  current  operations  and  endanger  our  financial
condition. Almost all of our stores have at least one home improvement warehouse
retailer  within their  trading area,  at an average  distance of  approximately
three miles.  Some of our major  competitors  have expansion  plans in place. We
expect that our major  competitors  will open  additional  stores in our current
market areas, which could harm our competitive position.

We will be harmed if comparable store sales decline or do not improve.

A  significant  measure of our  performance  is the change in annual  same store
sales,  which calculates the change from year to year in the sales of our stores
open for two full years. While our same store sales improved somewhat last year,
they have  generally  declined in recent years.  A variety of factors affect our
same store sales, including:

-- the timing and concentration of new store openings
-- actions of  competitors,  including the opening of additional  stores in our
   markets
-- the retail sales environment
-- general economic conditions
-- weather conditions
-- our ability to execute our business strategies effectively.

If same store  sales do not  continue  to  improve,  our  operating  results and
financial condition could be harmed.

If we have  difficulty  employing  and  retaining  enough  trained  personnel to
support our business, it could harm our operating results.

To  support  our  business,  we must  hire and  retain  an  adequate  number  of
personnel,  particularly  store managers and sales  associates,  who possess the
training and experience necessary to meet our customer service standards. We may
find it  difficult  to attract,  develop and retain the  personnel  necessary to
support our  business.  If we are not able to attract  and retain the  necessary
personnel, our operating results and financial condition could be harmed.

Our  relatively  short  history as a separate  company could harm our ability to
access credit facilities and the capital market.

Our  business  was  operated as a division of a much larger  company  until July
1997,  so  we do  not  have  a  significant  operating  history  as a  separate,
stand-alone company. Before July 1997, the two divisions of Waban Inc., BJ's and
HomeBase,  each had  access to the cash flow  generated  by the other and to the
combined  credit of the  enterprise,  which was based on the combined assets and
operating  results  of  the  BJ's  and  HomeBase  divisions.  If  our  financial
performance  as a  separate,  stand-alone  company  is poor,  it could  harm our
ability to access credit  facilities and capital  markets in the future.  To the
extent we experience  reduced access to capital or higher capital costs,  we may
have  difficulty  financing  our  business  strategies,  which  could  harm  our
operating results and financial condition.

Reliance on the western U.S. market could harm our operating results.

Our home improvement stores are located in the western United States,  with more
than half of them in  California.  We have been  harmed in the past by  economic
downturns  experienced in our geographic markets,  and future economic downturns
in the western U.S. could again harm us.

The extent of our real estate holdings subjects us to substantial  environmental
risks and regulations.

We are subject to a variety of federal,  state and local  governmental  laws and
regulations  relating to the use, storage,  discharge,  emission and disposal of
hazardous  materials.  We have engaged and may continue to engage in real estate
development  projects  and we own 18 parcels of real  estate on which our stores
are located. If we do not comply with environmental laws, it could result in the
imposition of severe  penalties or  restrictions  on operations by  governmental
agencies or courts of law,  which could harm our operating  results or financial
condition.  We do not have  environmental  liability  insurance  to cover  these
events. We do not know of any significant  environmental hazard on properties we
own or  have  owned,  or  operate  or have  operated.  However,  if  significant
environmental  hazards  occur or are  discovered,  we could be subject to severe
penalties,  including the costs of  remediation,  which could harm our operating
results or financial condition.

Potential conflicts of interest; management overlap.

Our  interests  and those of BJI may conflict  due to the ongoing  relationships
between the companies.  Sources of conflict include our continuing liability for
some of BJI's  contractual  obligations,  including  BJI  leases,  and the other
arrangements  between the parties  regarding  lease  liabilities.  In  addition,
Herbert J. Zarkin currently holds the executive offices of chairman of the board
of  directors,  president  and chief  executive  officer with us and chairman of
BJI's board of  directors;  Lorne R. Waxlax is a director of both  HomeBase  and
BJI; and Edward J. Weisberger serves as an officer and director of both HomeBase
and BJI. We have  implemented  procedures  to limit the  involvement  of Messrs.
Zarkin,  Waxlax and Weisberger in conflict situations,  including requiring them
to abstain from voting as directors of HomeBase on some matters.

Continuing obligations of HomeBase for lease liabilities after the spin-off.

Under the terms of the  spin-off,  BJI  assumed all  liabilities  to third party
lessors for leases  entered into by HomeBase  before the spin-off for use by the
former BJ's division.  While we will continue to be liable, by law, with respect
to  those  lease  liabilities,   BJI  has  agreed  to  indemnify  us  for  those
liabilities.  However,  if BJI is not able to make payments under the indemnity,
we would be harmed.

We may be harmed if holders of our notes require us to repurchase some or all of
the  notes  upon a change  of  control  and we do not have  sufficient  funds to
complete the repurchase.

On January 29, 2000, we had outstanding the principal amount of $92.4 million of
5.25% senior subordinated convertible notes. In the event of a change of control
of HomeBase,  each holder of our notes has the right to require us to repurchase
the notes held by the holder, in whole or in part, at a redemption price of 100%
of the  principal  amount  of the  notes put up for  redemption,  plus  interest
accrued  through the repurchase  date. If a change of control were to occur,  we
might  not have the  financial  resources  or be able to  arrange  financing  on
acceptable  terms to pay the repurchase  price for all the notes as to which the
repurchase  option is exercised.  Any repurchase in connection  with a change of
control  could,  depending  on the  circumstances  and absent a waiver  from the
holders of our senior debt,  be blocked due to the  subordination  provisions of
the notes. If we do not repurchase the notes when required,  an event of default
with respect to the notes and with respect to senior debt occur,  whether or not
the repurchase is permitted by the  subordination  provisions.  Such an event of
default,  and its  consequences,  could harm our operating results and financial
condition.


--------------------------------------------------------------------------------
  Forward-Looking Information
--------------------------------------------------------------------------------
  This  report on Form 10-K  contains  "forward-looking  statements"  within the
  meaning of Section 27A of the Securities Act of 1933, as amended,  and Section
  21E of the  Securities  Exchange  Act of 1934,  as amended.  When used in this
  report, the words "believe," "estimate," "expect,"  "anticipate," "plans," and
  similar expressions are intended to identify forward-looking  statements.  For
  this purpose any matters  discussed in this document  include  forward-looking
  statements  that involve risks and  uncertainties  that could cause results to
  differ materially from those expressed.  Such risks and uncertainties include,
  but are not limited to, the development of a new retail  concept;  the ability
  to continue to improve HomeBase's core business;  general economic  conditions
  prevailing in the Company's  markets;  the  competitive  marketplace and other
  factors.
--------------------------------------------------------------------------------


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company has not entered into any  transactions  using  derivative  financial
instruments.

The  Company's  major market risk  exposure is the  potential  loss arising from
changing interest rates and its impact on short-term investments. At January 29,
2000,  marketable  securities  consisted of $15.0 million in municipal bonds and
commercial paper, classified as available-for-sale.  Currently, the Company only
has  investments in fixed rate bonds. If interest rates were to increase and the
fair value of the bonds were to  decrease,  the  Company has the ability to hold
the bonds until maturity.


<PAGE>


Item 8. Financial Statements and Supplementary Data



                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES




Report of Independent Accountants.............................................20

Report on Management's Responsibility.........................................20

Consolidated Statements of Income for the fiscal years ended
January 29, 2000, January 30, 1999 and January 31, 1998.......................21

Consolidated Balance Sheets as of January 29, 2000 and January 30, 1999.......22

Consolidated Statements of Cash Flows for the fiscal years ended
January 29, 2000, January 30, 1999 and January 31, 1998.......................23

Consolidated Statements of Stockholders' Equity for the fiscal years ended
January 29, 2000, January 30, 1999 and January 31, 1998.......................24

Notes to Consolidated Financial Statements....................................25


<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of HomeBase, Inc.

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements of income,  stockholders' equity and cash flows present
fairly, in all material respects,  the financial position of HomeBase,  Inc. and
subsidiaries  at January 29, 2000 and January 30, 1999, and the results of their
operations and their cash flows for each of the three fiscal years in the period
ended January 29, 2000,  in  conformity  with  accounting  principles  generally
accepted in the United States. These financial statements are the responsibility
of the  Company's  management;  our  responsibility  is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements  in  accordance  with auditing  standards  generally  accepted in the
United  States,  which  require  that we plan and  perform  the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

Los Angeles, California
February 24, 2000


                      REPORT ON MANAGEMENT'S RESPONSIBILITY

The consolidated  financial statements and related financial information in this
annual report have been prepared by and are the  responsibility  of  management.
The consolidated financial statements were prepared in accordance with generally
accepted  accounting  principles and necessarily include amounts which are based
upon judgments and estimates made by management.

The  Company  maintains a system of internal  controls  designed to provide,  at
appropriate  cost,   reasonable  assurance  that  the  assets  are  safeguarded,
transactions are executed in accordance with management's  authorization and the
accounting  records may be relied upon for the  preparation of the  consolidated
financial  statements.  The  accounting  and  control  systems  are  continually
reviewed  by  management  and  modified  as  necessary  in  response to changing
business  conditions and the  recommendations of the Company's internal auditors
and independent accountants.

The Audit Committee, which is comprised of members of the Board of Directors who
are neither officers nor employees,  meets  periodically  with  management,  the
internal auditors and the independent  accountants to review matters relating to
the Company's financial  reporting,  the adequacy of internal accounting control
and the  scope  and  results  of  audit  work.  The  internal  auditors  and the
independent accountants have free access to the Committee.

The    consolidated     financial    statements    have    been    audited    by
PricewaterhouseCoopers  LLP,  whose  opinion  as to their fair  presentation  in
accordance with accounting  principles  generally  accepted in the United States
appears above.


Herbert J. Zarkin                                   William B. Langsdorf
Chairman of the Board, President and                Executive Vice President and
Chief Executive Officer                             Chief Financial Officer


<PAGE>


                                 HOMEBASE, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                               Fiscal Year Ended
---------------------------------------------------------------------------------------------------------------------
                                                                 January 29,        January 30,        January 31,
                                                                     2000               1999              1998
---------------------------------------------------------------------------------------------------------------------
                                                                                                       (53 Weeks)

  <S>                                                          <C>                <C>                <C>
  Net sales                                                    $   1,525,275      $   1,442,341      $   1,477,442

  Cost of sales, including buying and occupancy costs              1,196,465          1,124,250          1,159,253
---------------------------------------------------------------------------------------------------------------------
  Gross profit                                                       328,810            318,091            318,189

  Selling, general and administrative expenses                       304,457            278,232            285,773
  Pre-opening expenses                                                 3,726                919              1,408
  Store closures and other charges                                         -                  -             27,000
---------------------------------------------------------------------------------------------------------------------
  Operating income                                                    20,627             38,940              4,008

  Interest on debt and capital leases, net                             3,440              2,817              5,136
---------------------------------------------------------------------------------------------------------------------
  Income (loss) from continuing operations before income
    taxes and extraordinary gain (loss)                               17,187             36,123             (1,128)

  Provision (benefit) for income taxes                                 6,358             13,760               (445)
---------------------------------------------------------------------------------------------------------------------
  Income (loss) from continuing operations before
    extraordinary gain (loss)                                         10,829             22,363               (683)

  Income from discontinued operations, net of
    income taxes of $16,496                                                -                  -             20,575
---------------------------------------------------------------------------------------------------------------------
  Income before extraordinary gain (loss)                             10,829             22,363             19,892

  Extraordinary (loss) on early extinguishment
    of debt, net of income tax benefit of $5,896                           -                  -             (8,663)
  Extraordinary gain on early extinguishment of debt,
    net of income tax of $1,056                                        1,799                  -                  -
---------------------------------------------------------------------------------------------------------------------

  Net income                                                   $      12,628      $      22,363      $      11,229
=====================================================================================================================


  Basic net income per share:
    Income (loss) from continuing operations before
      extraordinary gain (loss)                                $        0.28      $        0.59      $       (0.02)
    Income from discontinued operations                                    -                  -               0.57
    Extraordinary gain (loss)                                           0.05                  -              (0.24)
---------------------------------------------------------------------------------------------------------------------

    Net income                                                 $        0.33      $        0.59      $        0.31
=====================================================================================================================

  Diluted net income per share:
    Income (loss) from continuing operations before
      extraordinary loss                                       $        0.28      $        0.54      $       (0.02)
    Income from discontinued operations                                    -                  -               0.57
    Extraordinary gain (loss)                                           0.05                  -              (0.24)
---------------------------------------------------------------------------------------------------------------------

    Net income                                                 $        0.33      $        0.54      $        0.31
=====================================================================================================================


  Shares used in computation of net income per share:

  Basic                                                               37,849             37,845             35,770
  Diluted                                                             37,936             48,013             35,770
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


<PAGE>


                                 HOMEBASE, INC.
                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                    January 29,        January 30,
                                                                                       2000               1999
--------------------------------------------------------------------------------------------------------------------
 ASSETS
   Current assets:
<S>                                                                               <C>                <C>
     Cash and cash equivalents                                                    $      26,747      $      35,578
     Marketable securities                                                               15,020             27,939
     Accounts receivable (net of allowance for doubtful accounts
      of $39 and $220)                                                                   29,439             20,759
     Merchandise inventories                                                            371,060            339,650
     Current deferred income taxes                                                        5,676              9,803
     Prepaid expenses and other current assets                                            4,507             17,044
--------------------------------------------------------------------------------------------------------------------
   Total current assets                                                                 452,449            450,773

   Property, net                                                                        257,726            256,835
   Property under capital leases, net                                                     4,759              5,198
   Deferred income taxes                                                                  6,856             10,205
   Other assets                                                                           5,952              5,971
--------------------------------------------------------------------------------------------------------------------

   Total assets                                                                   $     727,742      $     728,982
====================================================================================================================

 LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities:
     Accounts payable                                                             $     108,823      $     103,248
     Restructuring reserve                                                                1,771              2,066
     Accrued expenses and other current liabilities                                      73,195             75,838
     Accrued income taxes                                                                   635                691
     Current installments of long-term debt                                                   -              6,716
     Obligations under capital leases due within one year                                   327                284
--------------------------------------------------------------------------------------------------------------------
   Total current liabilities                                                            184,751            188,843

   Long-term debt                                                                        92,382            100,293
   Obligations under capital leases, less portion due within one year                     8,040              8,366
   Noncurrent restructuring reserve                                                       5,003              3,862
   Other noncurrent liabilities                                                          42,880             45,119

 Commitments and contingencies

 STOCKHOLDERS' EQUITY
   Preferred Stock, par value $.01 per share; 10,000,000 shares authorized;
     none outstanding                                                                         -                  -
   Common stock, par value $.01 per share; 190,000,000 shares authorized;
     37,874,798 and 37,879,044 shares issued and outstanding, respectively                  379                379
   Additional paid-in capital                                                           374,728            374,705
   Retained earnings                                                                     20,819              8,191
   Common stock in treasury at cost, 270,400 shares                                        (818)                 -
   Unearned compensation                                                                   (348)              (798)
   Unrealized holding gains (losses)                                                        (74)                22
--------------------------------------------------------------------------------------------------------------------
   Total stockholders' equity                                                           394,686            382,499
--------------------------------------------------------------------------------------------------------------------

   Total liabilities and stockholders' equity                                     $     727,742      $     728,982
====================================================================================================================
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


<PAGE>


                                 HOMEBASE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                             Fiscal Year Ended
------------------------------------------------------------------------------------------------------------------
                                                              January 29,       January 30,       January 31,
                                                                 2000               1999             1998
------------------------------------------------------------------------------------------------------------------
                                                                                                  (53 Weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                          <C>                <C>              <C>
   Net income                                                $    12,628        $    22,363      $     11,229
   Adjustments to reconcile net income to net cash
     provided by operating activities:
       Net income from discontinued operations                         -                  -           (20,575)
       Depreciation and amortization                              29,039             27,210            25,409
       Extraordinary (gain) loss                                  (2,855)                 -             8,663
       (Gain) loss on property disposals                            (669)                14               620
       Amortization of discount on marketable securities            (210)              (367)                -
       Income tax benefit of employee stock options                   57                466             2,202
       Other noncash items, net                                      398                676             1,755
       Deferred income taxes                                       7,475              5,930            (4,762)

     Increase (decrease) in cash due to changes in:
       Accounts receivable                                        (8,680)             4,638              (136)
       Merchandise inventories                                   (31,410)           (25,462)            2,350
       Prepaid expenses and other current assets                  12,537               (604)           (4,882)
       Other assets                                                  585             (1,136)              (74)
       Accounts payable                                            5,575              7,126            11,219
       Restructuring reserve                                       1,630             (6,564)           (1,135)
       Accrued expenses and other current liabilities             (2,514)             8,084              (345)
       Accrued income taxes                                          (56)            10,956             4,399
       Other noncurrent liabilities                               (2,239)            (5,266)           15,297
------------------------------------------------------------------------------------------------------------------

     Net cash provided by operating activities of:
       Continuing operations                                      21,291             48,064            51,234
       Discontinued operations                                         -                  -             1,559
------------------------------------------------------------------------------------------------------------------
     Net cash provided by operating activities                    21,291             48,064            52,793

 CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of marketable securities                           (12,728)           (71,088)          (13,203)
     Sale of marketable securities                                 8,586             11,589                 -
     Maturity of marketable securities                            17,164             38,553               365
     Property additions                                          (28,503)           (36,548)          (26,431)
     Property disposals                                              169                303               489
------------------------------------------------------------------------------------------------------------------

     Net cash used in investing activities of:
       Continuing operations                                     (15,312)           (57,191)          (38,780)
       Discontinued operations                                         -                  -           (23,269)
------------------------------------------------------------------------------------------------------------------
     Net cash used in investing activities                       (15,312)           (57,191)          (62,049)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Borrowings of  long-term debt                                     -                  -           100,000
     Repayment of long-term debt                                  (7,009)               (78)         (130,746)
     Early extinguishment of long-term debt                       (4,609)
     Debt issuance costs                                          (2,110)              (226)           (4,861)
     Repayment of capital lease obligations                         (283)              (254)             (180)
     Purchase of treasury stock                                     (818)                 -                 -
     Proceeds from sale and issuance of common stock                  19                660             5,815
     Cash paid to BJ's Wholesale Club, Inc. in spin-off                -                  -            (5,000)
------------------------------------------------------------------------------------------------------------------

     Net cash provided by (used in) financing activities of:
       Continuing operations                                     (14,810)               102           (34,972)
       Discontinued operations                                         -                  -            71,935
------------------------------------------------------------------------------------------------------------------
     Net cash provided by (used in) financing activities         (14,810)               102            36,963

     Net increase (decrease) in cash and cash equivalents         (8,831)            (9,025)           27,707
     Cash and cash equivalents at beginning of year               35,578             44,603            16,896
------------------------------------------------------------------------------------------------------------------

     Cash and cash equivalents at end of year                $    26,747        $    35,578      $     44,603
==================================================================================================================
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


<PAGE>



                                               HOMEBASE, INC.
                              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                               (In thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                Unrealized
                                          Common Stock   Additional              Holding   Retained   Treasury Stock       Total
                                        ----------------   Paid-In    Unearned    Gains    Earnings  ----------------- Stockholders'
                                         Shares   Amount   Capital  Compensation (Losses)  (Deficit)  Shares   Amount      Equity
------------------------------------------------------------------------------------------------------------------------------------

<S>                                      <C>     <C>      <C>        <C>         <C>       <C>         <C>   <C>         <C>
Balance, January 25, 1997                33,270  $   333  $ 330,941  $  (1,222)  $     -   $311,873    (529) $(10,000)   $  631,925
  Net income                                  -        -          -          -         -     11,229       -         -        11,229
  Unrealized holding gains                    -        -          -          -         6          -       -         -             6
  Exercise of stock options                 158        2      1,780          -         -          -     213     4,031         5,813
  Income tax benefit of stock options         -        -      2,202          -         -          -       -         -         2,202
  Restricted stock grants                   263        3      1,959     (1,962)        -          -       -         -             -
  Amortization of restricted stock grants     -        -          -        469         -          -       -         -           469
  Cancellation of restricted stock          (46)      (1)    (1,144)     1,145         -          -       -         -             -
  Conversion of 6.5% debentures           4,062       40    101,052          -         -          -     316     5,969       107,061
  Equity transfer in spin-off of
    BJ's Wholesale Club, Inc.                 -        -    (61,764)         -         -   (337,274)      -         -      (399,038)
------------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1998                37,707      377    375,026     (1,570)        6    (14,172)      -         -       359,667
  Net income                                  -        -          -          -         -     22,363       -         -        22,363
  Unrealized holding gains                    -        -          -          -        16          -       -         -            16
  Exercise of stock options                 184        2        657          -         -          -       -         -           659
  Income tax benefit of stock options         -        -        466          -         -          -       -         -           466
  Amortization of restricted stock grants     -        -          -        699         -          -       -         -           699
  Cancellation of restricted stock          (12)       -        (95)        73         -          -       -         -           (22)
  Equity transfer adjustment related to
    spin-off of BJ's Wholesale Club, Inc.     -        -     (1,349)         -         -          -       -         -        (1,349)
------------------------------------------------------------------------------------------------------------------------------------
Balance, January 30, 1999                37,879      379    374,705       (798)       22      8,191       -         -       382,499
  Net income                                  -        -          -          -         -     12,628       -         -        12,628
  Unrealized holding losses                   -        -          -          -       (96)         -       -         -           (96)
  Exercise of stock options                   5        -         20          -         -          -       -         -            20
  Income tax benefit of stock options         -        -         57          -         -          -       -         -            57
  Amortization of restricted stock grants     -        -          -        402         -          -       -         -           402
  Cancellation of restricted stock           (9)       -        (54)        48         -          -       -         -            (6)
  Repurchase of common shares                 -        -          -          -         -          -    (270)     (818)         (818)
------------------------------------------------------------------------------------------------------------------------------------

Balance, January 29, 2000                 37,875  $  379  $ 374,728  $    (348)  $   (74)  $ 20,819    (270)  $  (818)   $  394,686
====================================================================================================================================
</TABLE>

               The accompanying notes are an integral part of the
                       consolidated financial statements.


<PAGE>


                                 HOMEBASE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization

HomeBase(R),  Inc. (the "Company" or "HomeBase") is the second largest  operator
of home improvement  warehouse  stores in the western United States.  At January
29, 2000,  the Company  operated 88 stores in 10 states.  The  Company's  stores
average  approximately  103,000  square  feet of indoor  space and include up to
30,000 square feet of additional  exterior  full-service  garden and landscaping
centers.  The Company offers a broad  assortment of brand-name home  improvement
and  building  supply  products  at  competitive  prices to both  Do-It-Yourself
("DIY")  and  professional  customers.   In  certain  categories,   the  Company
supplements its brand-name offerings with high quality private label products.

On July 26,  1997,  the  Company  transferred  all of the net assets of its BJ's
Wholesale Club division ("BJ's") to BJ's Wholesale Club, Inc.  ("BJI").  On July
28, 1997, the Company distributed to its stockholders on a pro-rata basis all of
the  outstanding  common  stock  of  BJI  (the  "Distribution").  The  financial
statements  for the fiscal year ended  January  31,  1998 have been  restated to
present BJ's as a discontinued  operation.  Income from discontinued  operations
for the fiscal year ended  January 31, 1998 includes  transaction  costs of $5.0
million (net of tax) incurred in connection with the Distribution.

Note 2 - Summary of Accounting Policies

Basis of Presentation

The  consolidated  financial  statements  of the Company  include the  financial
statements of the Company's subsidiaries, all of which are wholly owned.

Fiscal Year

The Company operates within a conventional 52 or 53 week accounting  fiscal year
that ends on the last  Saturday in January.  The 52 weeks ended January 29, 2000
is referred to herein as "fiscal 1999".  The 52 weeks ended January 30, 1999 and
the 53 weeks ended  January 31, 1998 are referred to herein as "fiscal 1998" and
"fiscal 1997", respectively.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets and  liabilities  (e.g.,  co-operative
advertising and rebate reserves, self-insurance reserves, restructuring reserves
and inventory  reserves) and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

Cash Equivalents

The Company  considers highly liquid  investments  with an original  maturity of
three months or less at the time of purchase to be cash equivalents. Investments
with maturities exceeding three months are classified as marketable securities.

Marketable Securities

Management  determines the appropriate  classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Debt  securities  are  classified as  held-to-maturity  when the Company has the
positive intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost,  adjusted for  amortization of premiums
and accretion of discounts to maturity.

Marketable   equity   securities   and  debt   securities   not   classified  as
held-to-maturity  are  classified  as   available-for-sale.   Available-for-sale
securities are carried at fair value, with the unrealized gains and losses,  net
of tax, reported as a separate  component of stockholders'  equity.  The cost of
securities  sold is based on the specific  identification  method.  Interest and
dividends  on  securities  classified  as  available-for-sale  are  included  in
investment income.

Merchandise Inventories

Inventories  are  stated at the  lower of cost,  determined  under the  weighted
average  cost  method,  or market.  The Company  recognizes  the  write-down  of
slow-moving  or obsolete  inventory in cost of sales when such  write-downs  are
probable and estimable.

Property and Equipment

Property  and  equipment  are  stated  at cost.  Depreciation  expense  includes
amortization of property under capital leases.  Depreciation and amortization is
provided using the  straight-line  method using the following  estimated  useful
lives.

--------------------------------------------------------------------------------
Buildings                                   33 years
Property under capital leases and
  leasehold improvements                    Shorter of lease term or useful life
Furniture, fixtures, and equipment          3-10 years
--------------------------------------------------------------------------------

Pre-opening Costs

Pre-opening costs consist of direct  incremental costs of opening a facility and
are charged to operations as incurred.

Interest on Debt and Capital Leases

Interest on debt and capital leases in the consolidated  statements of income is
presented net of interest and  investment  income of $4.7 million,  $4.9 million
and $2.6 million in fiscal 1999, 1998 and 1997, respectively.

Long-Lived Assets

The  Company  follows  the  provisions  of  Statement  of  Financial  Accounting
Standards ("SFAS") No. 121,  "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived  Assets to Be Disposed Of". In accordance  with SFAS No. 121,
long-lived  assets  held and used by the  Company are  reviewed  for  impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be  recoverable.  Certain  long-lived  assets and  identifiable
intangibles  to be disposed of must be reported at the lower of carrying  amount
or fair value less cost to sell. For purposes of evaluating  the  recoverability
of long-lived assets,  the  recoverability  test is performed using undiscounted
net cash flows of the individual  stores and consolidated  undiscounted net cash
flows for long-lived  assets not identifiable to individual  stores.  Impairment
losses are  calculated  based on the  discontinued  cash flows and the estimated
salvage value of the impaired assets.

Income Taxes

The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes".  SFAS No.  109 is an asset and  liability  approach  that  requires  the
recognition of deferred tax assets and  liabilities  for the expected future tax
consequences  of events that have been  recognized  in the  Company's  financial
statements or tax returns.  In estimating future tax consequences,  SFAS No. 109
generally  considers all expected  future events other than proposed  changes in
the tax law or rates.

Discontinued Operations

For fiscal 1997, interest expense was allocated to discontinued operations based
on the  ratio of BJ's net  assets to the sum of  consolidated  net  assets  plus
consolidated  debt. In the first quarter of fiscal 1998, the Company recorded an
additional  equity transfer to BJI of approximately  $1.3 million,  related to a
net asset adjustment of BJ's as of the time of the Distribution.

Reclassifications

Certain prior period  amounts have been  reclassified  to conform to the current
year presentation.

New Accounting Standards

Effective  January 30,  1999,  the  Company  adopted  SFAS No. 132,  "Employers'
Disclosures about Pensions and Other Post-Retirement  Benefits".  The provisions
of  SFAS  No.  132  revises  employers'  disclosures  about  pension  and  other
post-retirement  benefit plans.  SFAS No. 132 does not change the measurement or
recognition of these plans,  and  standardizes  the disclosure  requirements for
pensions and other post-retirement benefits to the extent practicable.

SFAS   No.   137,   "Accounting   for   Derivative   Instruments   and   Hedging
Activities-Deferral  of the  Effective  Date  of  FASB  Statement  No.  133  (an
amendment of FASB  Statement  No. 133)"  establishes  accounting  and  reporting
standards for derivative instruments and for hedging activities. It is effective
for all fiscal  quarters of fiscal  years  beginning  after June 15,  2000.  The
Company  currently does not have any derivative  financial  instruments and does
not currently employ any hedging activities.

Note 3 - Supplemental Balance Sheet Information

Property and Equipment

Property and equipment consists of the following components:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                          January 29,      January 30,
(In thousands)                                                               2000              1999
-----------------------------------------------------------------------------------------------------------

<S>                                                                       <C>              <C>
Land and buildings                                                        $   157,932      $   157,760
Leasehold improvements                                                         72,795           69,577
Furniture, fixtures and equipment                                             170,316          148,674
-----------------------------------------------------------------------------------------------------------
                                                                              401,043          376,011
Accumulated depreciation                                                     (143,317)        (119,176)
-----------------------------------------------------------------------------------------------------------

Property and equipment, net                                               $   257,726      $   256,835
===========================================================================================================
</TABLE>

Property under Capital Leases

Property under capital leases consists of the following components:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                          January 29,      January 30,
(In thousands)                                                               2000              1999
-----------------------------------------------------------------------------------------------------------

<S>                                                                       <C>              <C>
Property under capital leases                                             $     9,696      $     9,696
Accumulated depreciation                                                       (4,937)          (4,498)
-----------------------------------------------------------------------------------------------------------

Property under capital leases, net                                        $     4,759      $     5,198
===========================================================================================================
</TABLE>

Accrued Expenses and Other Current Liabilities

The  following are the major  components  of accrued  expenses and other current
liabilities:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                          January 29,      January 30,
(In thousands)                                                               2000              1998
-----------------------------------------------------------------------------------------------------------

<S>                                                                       <C>              <C>
Self-insurance reserves                                                   $    14,209      $    18,370
Employee compensation                                                          18,036           21,427
Sales and use taxes                                                            13,696           12,724
Rent, utilities, advertising and other                                         27,254           23,317
-----------------------------------------------------------------------------------------------------------

Total  accrued expenses and other current liabilities                     $    73,195      $    75,838
===========================================================================================================
</TABLE>

Note 4 - Supplemental Cash Flow Information

<TABLE>
<CAPTION>
                                                                        Fiscal Year Ended
------------------------------------------------------ ----------------------------------------------------
                                                         January 29,       January 30,      January 31,
(In thousands)                                               2000             1999              1998
------------------------------------------------------ ----------------- ---------------- -----------------

Supplemental cash flow information:
<S>                                                       <C>             <C>              <C>
   Interest paid (including discontinued operations)      $     6,433     $     7,260      $     9,480
   Income taxes paid (refunded), including
     discontinued operations                                   (2,722)         (4,485)          35,713

 Noncash financing and investing activities:
   Conversion of long-term debt to stock, net             $         -     $         -      $   107,061
------------------------------------------------------ ----------------- ---------------- -----------------
</TABLE>

Note 5 - Net Income Per Share

The Company adopted SFAS No. 128,  "Earnings per Share" in fiscal 1997. SFAS No.
128 replaced the  calculation  of primary and fully diluted net income per share
with basic and  diluted  net income per  share.  Unlike  primary  net income per
share, basic net income per share excludes any dilutive effects of stock options
and  convertible  securities.  Diluted  net  income  per share is similar to the
previously reported fully diluted net income per share.

The following table sets forth the computation of net income per share:

<TABLE>
<CAPTION>
                                                                        Fiscal Year Ended
------------------------------------------------------ ----------------------------------------------------
                                                         January 29,       January 30,      January 31,
(In thousands)                                               2000             1999              1998
------------------------------------------------------ ----------------- ---------------- -----------------

Numerator:

<S>                                                     <C>               <C>              <C>
   Income (loss) from continuing operations
     before extraordinary (gain) loss                   $    10,829       $    22,363      $      (683)
   Income from discontinued operations (net of
     income taxes)                                                -                 -           20,575
   Extraordinary gain (loss) (net of income taxes)            1,799                 -           (8,663)
------------------------------------------------------ ----------------- ---------------- -----------------
   Numerator for basic net income per share             $    12,628       $    22,363      $    11,229

Effect of dilutive securities:
   5.25% convertible subordinated notes (1)                       -             3,574                -
------------------------------------------------------ ----------------- ---------------- -----------------

   Numerator for diluted net income per share           $    12,628       $    25,937      $    11,229
====================================================== ================= ================ =================

                                                                        Fiscal Year Ended
------------------------------------------------------ ----------------- ---------------- -----------------
                                                         January 29,       January 30,      January 31,
(In thousands)                                               2000             1999              1998
------------------------------------------------------ ----------------- ---------------- -----------------

Denominator:

   Denominator for basic net income per share-
     weighted average shares                                 37,849            37,845           35,770

Effect of dilutive securities:
   Employee stock options (2)                                    87               381                -
   Assumed conversion of 5.25%
     convertible subordinated notes (1)                           -             9,787                -
------------------------------------------------------ ----------------- ---------------- -----------------

   Denominator for diluted net income per share              37,936            48,013           35,770
====================================================== ================= ================ =================
</TABLE>


(1)  In fiscal 1999 and 1997,  the effect of the  conversion of the  convertible
     securities has been excluded from the computation of diluted net income per
     share because it was antidilutive.
(2)  In fiscal 1997,  the effect of stock options was  antidilutive  because the
     Company reported a net loss from continuing  operations.  These shares have
     been excluded from the computation of diluted net income per share.

Note 6 - Debt

At January 29,  2000 and  January 30,  1999,  long-term  debt  consisted  of the
following components:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                          January 29,      January 30,
(In thousands)                                                               2000              1999
-----------------------------------------------------------------------------------------------------------

<S>                                                                       <C>              <C>
Real estate debt, interest at 9.25%, maturing through March 1,
   2003 (paid February 26, 1999)                                          $         -      $       372
Senior subordinated notes, interest at 11%,
   maturing May 15, 2004 (paid May 17, 1999)                                        -            6,637
Convertible subordinated notes, interest at 5.25%,
   maturing November 1, 2004                                                   92,382          100,000
-----------------------------------------------------------------------------------------------------------
                                                                               92,382          107,009
Current installments of long-term debt                                              -           (6,716)
-----------------------------------------------------------------------------------------------------------

Total long-term debt                                                      $    92,382      $   100,293
===========================================================================================================
</TABLE>


The following are the aggregate  maturities  of long-term  debt  outstanding  at
January 29, 2000:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

(In thousands)                                                        Total
--------------------------------------------------------------------------------

Fiscal years ending January:
   <S>                                                          <C>
   2001                                                         $          -
   2002                                                                    -
   2003                                                                    -
   2004                                                               92,382
--------------------------------------------------------------------------------

   Total                                                        $     92,382
================================================================================
</TABLE>

On November  17,  1997,  the Company  completed  the private  placement  of $100
million,  5.25%  convertible  subordinated  notes due November 1, 2004 through a
Rule 144A/Regulation S offering,  and received approximately $96 million, net of
debt issuance costs. The Company subsequently filed a registration  statement on
Form S-3,  which was declared  effective on February 10, 1998,  registering  the
notes and the common stock into which the notes are  convertible.  The notes are
convertible,  subject to adjustment in certain events,  into  approximately  9.8
million shares of the Company's common stock at a conversion price of $10.22 per
share at any time prior to maturity  unless  earlier  redeemed  or  repurchased.
Subsequent  to November 1, 2000,  the notes are  redeemable at the option of the
Company,  in whole or in part,  initially at 103.15% of principal and thereafter
at prices declining to 100% on or after November 1, 2003,  together with accrued
interest.  Interest  is payable  semi-annually  on May 1 and  November 1 of each
year,  commencing  on May 1,  1998.  In the  event of a  change  of  control  of
HomeBase,  each  holder of the notes has the right to  require  the  Company  to
repurchase  the notes held by the holder,  in whole or in part,  at a redemption
price of 100% of the principal  amount of the notes put up for redemption,  plus
interest accrued through the repurchase date.

In November 1999,  the Board of Directors  authorized the Company to spend up to
$20  million  to  repurchase   HomeBase  common  stock  and  5.25%   convertible
subordinated  notes  periodically  in the  open  market,  as  market  conditions
warrant.  As of January 29, 2000,  the Company had  repurchased  $7.6 million in
face value of the convertible  notes for $4.6 million.  In connection with these
purchases, the Company recognized a $1.8 million extraordinary gain on the early
extinguishment  of  debt,  net  of  income  taxes.  The  repurchase  program  is
authorized to extend through December 31, 2001.

On December 3, 1999,  the Company  entered into a new,  five-year,  $250 million
revolving  line of credit.  This  agreement  replaced the previous  $105 million
credit line and  provides  the Company with  greater  financial  flexibility  to
pursue  its  growth  objectives.  Borrowings  under  the  new  credit  line  are
collateralized by eligible inventory and accounts receivable. The Company paid a
one-time underwriting fee of $2,125,000 (0.85%) and is required to pay an unused
line fee of 0.375% annually.  Interest on borrowings will be calculated based on
the LIBOR rate plus a 1.5% to 2.0%  margin.  The new  credit  line is subject to
certain financial covenants should excess availability under the line fall below
$40 million.

At  January  29,  2000,  the  Company  had  letters  of  credit  outstanding  of
approximately $15.3 million primarily to support the purchase of inventories.

Note 7 - Leases

The Company is obligated  under  long-term  leases for the rental of real estate
and fixtures and equipment, some of which are classified as capital leases under
the provisions of SFAS No. 13, "Accounting for Leases", as amended. In addition,
the Company is generally required to pay insurance,  real estate taxes and other
operating expenses and, in some cases,  additional rentals based on a percentage
of sales or increases in the Consumer Price Index.  The real estate leases range
up to 25 years and have  varying  renewal  options.  The fixture  and  equipment
leases range up to 10 years.

Future minimum lease payments as of January 29, 2000 were:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------- -----------------
                                                                            Capital          Operating
(In thousands)                                                               Leases            Leases
---------------------------------------------------------------------------------------- -----------------

Fiscal years ending January:
   <S>                                                                    <C>                <C>
   2001                                                                   $     1,455      $    72,577
   2002                                                                         1,455           72,390
   2003                                                                         1,455           65,887
   2004                                                                         1,508           64,447
   2005                                                                         1,543           61,508
   Thereafter                                                                   8,716          339,694
---------------------------------------------------------------------------------------- -----------------
   Total minimum lease payments                                                16,132      $   676,503
                                                                                         =================
   Less amount representing interest                                           (7,765)
----------------------------------------------------------------------------------------

   Present value of net minimum capital lease payments                    $     8,367
========================================================================================
</TABLE>

Rental expense under operating  leases amounted to $70.8 million,  $66.8 million
and $64.8  million in fiscal 1999,  1998 and 1997,  respectively.  These amounts
exclude rent of $3.0 million, $3.8 million and $2.4 million in fiscal 1999, 1998
and 1997,  respectively,  which was charged to the restructuring or closed store
reserves.  Future minimum lease payments have not been reduced by future minimum
sublease rentals of $3.6 million under an operating lease.

The table of future minimum lease payments above includes lease  commitments for
three  stores  that were closed in  connection  with the  Company's  fiscal 1993
restructuring and two stores that were closed in fiscal 1997.

Note 8 - Income Taxes

Income (loss) before income taxes and the related provision (benefit) for income
taxes consist of the following components:
<TABLE>
<CAPTION>
                                                                       Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                                        January 29,       January 30,      January 31,
(In thousands)                                              2000             1999              1998
-----------------------------------------------------------------------------------------------------------

Income (loss) before income taxes:
<S>                                                     <C>               <C>              <C>
     Continuing operations                              $    17,187       $    36,123      $    (1,128)
     Discontinued operations                                      -                 -           37,071
     Extraordinary gain (loss)                                2,855                 -          (14,559)
-----------------------------------------------------------------------------------------------------------

Total                                                   $    20,042       $    36,123      $    21,384
===========================================================================================================

                                                                       Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                                        January 29,       January 30,      January 31,
(In thousands)                                              2000             1999              1998
-----------------------------------------------------------------------------------------------------------

Provision (benefit) for income taxes attributable
     to income from continuing operations               $     6,358       $    13,760      $      (445)
Provision for income taxes attributable to income
     from discontinued operations                                 -                 -           16,496
Provision (benefit) for income taxes attributable to
     extraordinary gain (loss)                                1,056                 -           (5,896)
-----------------------------------------------------------------------------------------------------------

Total provision for income taxes                        $     7,414       $    13,760      $    10,155
===========================================================================================================
</TABLE>

The following  are the  significant  components  of the provision  (benefit) for
income taxes attributable to continuing operations:
<TABLE>
<CAPTION>
                                                                       Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                                        January 29,       January 30,      January 31,
(In thousands)                                              2000             1999              1998
-----------------------------------------------------------------------------------------------------------

Current:
<S>                                                     <C>               <C>              <C>
     Federal                                            $      (744)      $     6,183      $     3,475
     State                                                     (373)            1,647              842
-----------------------------------------------------------------------------------------------------------
Total current                                           $    (1,117)      $     7,830      $     4,317
-----------------------------------------------------------------------------------------------------------

Deferred:
     Federal                                            $     5,776       $     5,652      $    (3,847)
     State                                                    1,699               278             (915)
-----------------------------------------------------------------------------------------------------------
Total deferred                                          $     7,475       $     5,930      $    (4,762)
-----------------------------------------------------------------------------------------------------------

Total provision (benefit) for income taxes
    attributable to income from continuing operations   $     6,358       $    13,760      $      (445)
===========================================================================================================
</TABLE>

The following is a reconciliation  of the statutory  federal income tax rate and
the effective income tax rate for income from continuing operations:
<TABLE>
<CAPTION>
                                                                       Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                                        January 29,       January 30,      January 31,
                                                            2000             1999              1998
-----------------------------------------------------------------------------------------------------------

<S>                                                          <C>               <C>              <C>
Statutory federal income tax rate                            35%               35%              35%
State income taxes, net of federal tax
    benefit                                                   4                 2                4
Other                                                        (2)                1                1
-----------------------------------------------------------------------------------------------------------

Effective income tax rate                                    37%               38%              40%
===========================================================================================================
</TABLE>

The following  are the  significant  components  of the  Company's  deferred tax
assets and (liabilities) as of January 29, 2000 and January 30, 1999:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                          January 29,      January 30,
(In thousands)                                                               2000              1999
-----------------------------------------------------------------------------------------------------------

Deferred tax assets:
<S>                                                                       <C>              <C>
     Self-insurance reserves                                              $    14,502      $    15,557
     Rental step liabilities                                                    4,055            4,531
     Restructuring and closed store reserves                                    7,627            9,900
     Capital leases                                                             1,533            1,491
     Compensation and benefits                                                  2,510            2,217
     Other                                                                      4,444            5,227
-----------------------------------------------------------------------------------------------------------
Total deferred tax assets                                                 $    34,671      $    38,923
-----------------------------------------------------------------------------------------------------------

Deferred tax liabilities:
     Accelerated depreciation                                             $   (13,711)     $    (8,898)
     Purchase discounts                                                        (3,323)          (1,890)
     Other                                                                     (5,105)          (8,127)
-----------------------------------------------------------------------------------------------------------
Total deferred tax liabilities                                            $   (22,139)     $   (18,915)
-----------------------------------------------------------------------------------------------------------

Net deferred tax assets                                                   $    12,532      $    20,008
===========================================================================================================
</TABLE>

The Company has not established a valuation  allowance  because its deferred tax
assets can be realized by  offsetting  taxable  income  mainly in the  carryback
period,  and also against  deferred tax  liabilities  and future taxable income,
which  management  believes  will more  likely  than not be earned  based on the
Company's historical earnings record.

Note 9 - Investments In Marketable Securities

The following is a summary of available-for-sale securities:

<TABLE>
<CAPTION>
                                                      Fiscal Year Ended January 29, 2000
-----------------------------------------------------------------------------------------------------------
                                        Amortized     Gross Unrealized Gross Unrealized     Estimated
(In thousands)                             Cost            Gains            Losses          Fair Value
-----------------------------------------------------------------------------------------------------------

<S>                                     <C>            <C>                <C>              <C>
U.S. corporate securities               $      1,000   $         -        $         -      $     1,000
Obligations of state and
   political subdivisions                     14,094             -                (74)          14,020
-----------------------------------------------------------------------------------------------------------

      Total debt securities             $     15,094   $         -        $       (74)     $    15,020
===========================================================================================================

                                                      Fiscal Year Ended January 30, 1999
-----------------------------------------------------------------------------------------------------------
                                        Amortized     Gross Unrealized Gross Unrealized     Estimated
(In thousands)                             Cost            Gains            Losses          Fair Value
-----------------------------------------------------------------------------------------------------------

U.S. corporate securities               $     14,743   $         -        $         -      $    14,743
Obligations of state and
   political subdivisions                     13,174            22                  -           13,196
-----------------------------------------------------------------------------------------------------------

      Total debt securities             $     27,917   $        22        $         -      $    27,939
===========================================================================================================
</TABLE>

The following are  contractual  maturities of  available-for-sale  securities at
January 29, 2000:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                     Amortized        Estimated
(In thousands)                                         Cost           Fair Value
--------------------------------------------------------------------------------

<S>                                                <C>              <C>
Less than one year                                 $    10,811      $    10,777
1-5 years                                                4,283            4,243
--------------------------------------------------------------------------------

                                                   $    15,094      $    15,020
================================================================================
</TABLE>

The following is other information on available-for-sale securities:

<TABLE>
<CAPTION>
                                                                       Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                                        January 29,       January 30,      January 31,
(In thousands)                                              2000             1999              1998
-----------------------------------------------------------------------------------------------------------

<S>                                                    <C>               <C>               <C>
Sales proceeds                                         $     8,586       $    11,589       $         -
Gross realized losses                                            -                (1)                -
-----------------------------------------------------------------------------------------------------------
</TABLE>

The specific  identification  method is used to compute realized gains or losses
on the sale of marketable securities.

At January  30,  1999,  marketable  securities  classified  as  held-to-maturity
consisted of U.S. Treasury securities,  which were included in "Prepaid expenses
and other current assets" on the  consolidated  balance sheet at their amortized
cost of $7.2 million.  These  securities  were purchased and deposited in escrow
with the trustee of the  Company's  senior  subordinated  notes and were used to
retire the debt and pay interest through May 1999.

Note 10 - Disclosures About Fair Value of Financial Instruments

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.

Cash and Cash Equivalents

The carrying  amount  approximates  fair value because of the short  maturity of
these instruments.

Marketable Securities

The fair value of the Company's marketable  securities is based on quoted values
provided by an independent pricing service utilized by broker dealers and mutual
fund companies.

General Corporate Debt

The fair value of the Company's general corporate debt is estimated based on the
current rates for similar  issues or on the current rates offered to the Company
for debt of the same remaining maturities.

Subordinated Debt

The fair  value of the  Company's  subordinated  debt is based on quoted  market
prices.

The  following  are  the  estimated  fair  values  of  the  Company's  financial
instruments:

<TABLE>
<CAPTION>
                                              January 29, 2000                   January 30, 1999
-----------------------------------------------------------------------------------------------------------
                                            Carrying                          Carrying
(In thousands)                               Amount      Fair Value            Amount       Fair Value
-----------------------------------------------------------------------------------------------------------

<S>                                     <C>             <C>               <C>              <C>
Cash and cash equivalents               $     26,747    $    26,747       $     35,578     $    35,578
 Marketable securities                        15,020         15,020             27,939          27,939
 Real estate debt                                  -              -               (372)           (387)
 Senior subordinated debt                          -              -             (6,637)         (7,228)
Convertible subordinated debt                (92,382)       (55,429)          (100,000)        (80,690)
-----------------------------------------------------------------------------------------------------------
</TABLE>

Note 11 - Capital Stock, Stock Options and Stock Purchase Plans

At January  29,  2000,  the Company had two  stock-based  employee  compensation
plans.

Under its 1989 Stock  Incentive  Plan  ("1989  Plan"),  the  Company has granted
options to certain key employees,  which expire seven to 10 years from the grant
date, to purchase  common stock at prices equal to 100% of the fair value on the
grant date.  Options  outstanding are exercisable over various periods generally
starting one year after the grant date.  The Company has also issued  restricted
stock  awards to certain  key  employees  at no cost  under the 1989  Plan.  The
restrictions  on the  transferability  of  those  shares  which  are tied to the
Company's performance lapse over periods that range up to eight years. For other
awards,  restrictions  on the sale of shares lapse over periods that range up to
four  years.  The 1989 Plan  expired in January  1998,  except as to options and
restricted  shares then  outstanding.  At January 29,  2000,  1,999,749  options
issued under the 1989 Plan remained  outstanding at prices ranging from $2.20 to
$6.45 per share.

Under  its 1995  Director  Stock  Option  Plan,  the  Company  has  granted  its
non-employee  directors options to purchase common stock at prices equal to 100%
of the fair value on the grant date.  These options,  which expire 10 years from
the grant date, are  exercisable  over periods  starting one year after they are
granted. A maximum of 150,000 shares may be issued under the 1995 Director Stock
Option Plan. In the third quarter of fiscal 1998, the Board of Directors elected
to suspend the 1995 Director  Stock Option Plan.  Any grants to Directors  after
that date will be issued under the Company's 1997 Stock Incentive Plan.

Under its 1997 Stock  Incentive Plan, the Company has granted options to certain
key  employees,  which expire seven to 10 years from the grant date, to purchase
common  stock  at  prices  equal to 100% of the fair  value on the  grant  date.
Options  outstanding are exercisable over various periods generally starting one
year after the grant date. The Company has also issued  restricted  stock awards
to certain key  employees at no cost under its 1997 Stock  Incentive  Plan.  The
restrictions  on the  transferability  of those  shares  lapse over periods that
range up to four years.  A maximum of  3,500,000  shares may be issued under the
1997 Stock Incentive Plan.

In connection with the  Distribution,  all outstanding  options of directors and
employees who transferred to BJI were canceled.  All outstanding options held by
the remaining  directors and employees of the Company were replaced;  the number
of options was  proportionately  adjusted and the exercise prices were decreased
using a ratio of the average closing price of the Company's common stock for the
10  days  immediately  following  the  Distribution  to the  fair  value  of the
Company's  common stock before the  Distribution.  The adjustment  preserved the
economic  value of the options that existed prior to the  Distribution  date. In
July 1997,  the number of options  issuable under the 1989 Plan was increased by
1.5 million shares as a result of the proportionate option adjustment.

The  Company  applies  APB  Opinion  No. 25 in  accounting  for its  stock-based
compensation. During fiscal 1997, 263,391 shares of restricted stock were issued
at a weighted-average grant-date fair value of $7.45. Total pre-tax compensation
cost charged to income for stock-based  employee  compensation  awards in fiscal
1999, 1998 and 1997 was $0.7, $0.5 and $0.4 million, respectively, and consisted
entirely of compensation  expense related to restricted stock,  which is charged
to income  ratably  over the period  during  which the  restrictions  lapse.  No
compensation  cost was  recognized  for the  Company's  stock  options under APB
Opinion  No. 25 because  the  exercise  price  equaled  the market  price of the
underlying stock on the date of the grant.

Pro forma information  regarding net income and net income per share is required
by SFAS  No.  123,  "Accounting  for  Stock-Based  Compensation,"  and has  been
determined  as if the Company had accounted for its stock options under the fair
value method of that  statement.  The fair value for these options was estimated
at the  grant  date  using  the  Black-Scholes  option  pricing  model  with the
following weighted average assumptions:

<TABLE>
<CAPTION>
                                                Fiscal Year Ended
--------------------------------------------------------------------------------
                                  January 29,       January 30,      January 31,
                                     2000             1999              1998
--------------------------------------------------------------------------------

<S>                                  <C>               <C>              <C>
Risk-free interest rate              6.63%             4.62%            5.64%
Expected volatility                  41.1%             37.0%            36.0%
Dividend yield                          -                 -                -
Expected option life               4.5 years         4.5 years        4.5 years
--------------------------------------------------------------------------------
</TABLE>

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the existing  models may not provide a reliable  single measure of the
fair value of its stock options.

For purposes of the following pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting period:

<TABLE>
<CAPTION>
                                                                       Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                                        January 29,       January 30,      January 31,
(In thousands, except per share amounts)                    2000             1999              1998
-----------------------------------------------------------------------------------------------------------

<S>                                                     <C>               <C>              <C>
Pro forma income (loss) from continuing
     operations before extraordinary gain               $     8,589       $    20,617      $    (1,772)

Extraordinary gain on early extinguishment of debt            1,799                 -                -
-----------------------------------------------------------------------------------------------------------

Pro forma net income                                    $    10,388       $    20,617      $    10,140
===========================================================================================================

Pro forma income (loss) per share--Income from
     continuing operations before extraordinary gain
        Basic                                           $      0.23       $      0.54      $     (0.05)
        Diluted                                         $      0.23       $      0.43      $     (0.05)

Pro forma income per share--Net income:
        Basic                                           $      0.27       $      0.54      $      0.28
        Diluted                                         $      0.27       $      0.43      $      0.28
-----------------------------------------------------------------------------------------------------------
</TABLE>

The effects of applying the provisions of SFAS No. 123 for pro forma  disclosure
purposes  are not  necessarily  representative  of the effects on  reported  net
income for future years because  options vest over several years and  additional
awards  generally  are  made  each  year.  In  accordance  with  the  transition
requirements of SFAS No. 123, the pro forma disclosures above only include stock
options awarded after January 28, 1995.

The  following is a summary of the Company's  stock option  activity and related
information:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                  Number Of     Weighted-Average
                                                   Options       Exercise Price
--------------------------------------------------------------------------------

Fiscal Year Ended January 31, 1998:

<S>                                               <C>            <C>
Outstanding at beginning of year                  2,539,624      $    18.88
          Granted                                   817,650            9.26
          BJ's spin-off adjustments               1,213,988               -
          Exercised                                (422,337)          17.35
          Forfeited                              (1,040,860)          17.82
          Expired                                        -                -
--------------------------------------------------------------------------------

Outstanding at January 31, 1998                   3,108,065      $     5.30
================================================================================

Fiscal Year Ended January 30, 1999:
          Granted                                   531,850      $     6.15
          Exercised                                (184,172)           3.58
          Forfeited                                (159,904)           6.43
          Expired                                         -               -
--------------------------------------------------------------------------------

Outstanding at January 30, 1999                   3,295,839      $     5.48
================================================================================

Fiscal Year Ended January 29, 2000:
          Granted                                   737,150      $     4.21
          Exercised                                  (4,417)           4.45
          Forfeited                                (652,427)           6.56
          Expired                                        -                -
--------------------------------------------------------------------------------

Outstanding at January 29, 2000                   3,376,145      $     4.99
================================================================================

--------------------------------------------------------------------------------
                                                  Number Of     Weighted-Average
                                                   Options       Exercise Price
--------------------------------------------------------------------------------
Exercisable at:
          January 31, 1998                        1,100,056            3.82
          January 30, 1999                        1,594,476            4.42
          January 29, 2000                        2,282,277            4.96
--------------------------------------------------------------------------------

Weighted-average fair value of options granted during the year:
          Fiscal 1997                                                  3.55
          Fiscal 1998                                                  2.32
          Fiscal 1999                                                  1.85
--------------------------------------------------------------------------------
</TABLE>


The following is additional  information related to stock options outstanding at
January 29, 2000:

<TABLE>
<CAPTION>
                         Options Outstanding                                  Options Exercisable
----------------------------------------------------------------------- -----------------------------------
                                                          Weighted-
                                           Weighted-       Average                          Weighted-
                                            Average       Remaining                          Average
        Range Of             Number        Exercise      Contractual         Number          Exercise
     Exercise Prices       Outstanding       Price      Life (Years)      Exercisable         Price
----------------------------------------------------------------------- -----------------------------------

   <S>          <C>           <C>         <C>                 <C>           <C>            <C>
   $ 2.00   to  $ 3.23          347,488   $     2.83          4.2             347,488      $     2.83
     3.24   to    4.64        1,791,457         4.15          5.4           1,120,107            4.13
     4.65   to    6.45          765,226         6.01          6.8             449,951            6.00
     6.46   to    9.00          471,974         8.14          7.7             364,731            8.24
----------------------------------------------------------------------- -----------------------------------

   $ 2.00   to  $ 9.00        3,376,145   $     4.99          5.9           2,282,277      $     4.96
======================================================================= ===================================
</TABLE>

As of January 29,  2000,  January 30,  1999 and  January  31,  1998,  2,241,283,
2,363,860 and  2,723,306  shares,  respectively,  were reserved for future stock
awards under the Company's stock option plans.

In April  1999,  the  Company  adopted a  replacement  stockholder  rights  plan
designed to discourage  attempts to acquire the Company on terms not approved by
the Board of Directors.  The replacement rights plan replaced an existing rights
plan that  expired  by its terms in April  1999.  Under  the  replacement  plan,
stockholders  were issued one Right for each share of common stock owned,  which
entitles them to purchase 1/100 share of Series A Junior Participating Preferred
Stock ("Series A Preferred  Stock") at an exercise price of $50. The Company has
designated 1,900,000 shares of Series A Preferred Stock for use under the rights
plan; none has been issued. Generally, the terms of the Series A Preferred Stock
are  designed so that 1/100 share of Series A  Preferred  Stock is the  economic
equivalent of one share of the Company's  common stock.  In the event any person
acquires  15% or more of the  Company's  outstanding  stock,  the Rights  become
exercisable  for the number of common  shares which,  at the time,  would have a
market value of two times the exercise price of the Right.

The Company has  authorized  10,000,000  shares of  preferred  stock,  $0.01 par
value, of which no shares have been issued.

Note 12 - Pensions and Other Post-Retirement Benefits

The Waban Inc.  Retirement Plan (the "Retirement  Plan") was a  non-contributory
defined benefit retirement plan covering  full-time  employees who have attained
21 years of age and have  completed one year of service.  Benefits were based on
compensation earned in each year of service. No benefits have accrued under this
plan since July 4, 1992,  when it was  frozen.  On July 26,  1997,  the Board of
Directors  approved the  termination of the Retirement  Plan. In accordance with
generally accepted accounting principles,  the costs to terminate the Retirement
Plan were not recognized until the Plan was settled, which occurred in the first
quarter of fiscal 1998.  The Plan was settled  through cash payments and through
the purchase of non-participating annuity contracts.

The  Company   sponsors  a  defined   benefit   post-retirement   medical   plan
("Post-Retirement  Medical  Plan") that covers  employees  and their spouses who
retire after age 55 with at least 10 years of service,  who are not eligible for
Medicare,  and who  participated in a  Company-sponsored  medical plan.  Amounts
contributed by retired  employees  under this plan are based on years of service
prior to retirement. The Post-Retirement Medical Plan is not funded.

The  following  table  provides  a  reconciliation   of  the  Company's  benefit
obligations, plan assets and funded status of the plans.

<TABLE>
<CAPTION>
                                                                                   Post-Retirement
                                                   Retirement Plan                  Medical Plan
                                          -----------------------------------------------------------------
                                                  Fiscal Year Ended               Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                             January 29,     January 30,     January 29,    January 30,
(In thousands)                                  2000             1999           2000            1999
-----------------------------------------------------------------------------------------------------------

Change in Benefit Obligation:
     <S>                                     <C>              <C>             <C>            <C>
     Benefit obligation at beginning of year $        -       $    3,331      $      767     $      595
     Service cost                                     -                -              90            118
     Interest cost                                    -                -              30             40
     Actuarial (gain) loss                            -              670            (370)            14
     Benefits paid                                    -           (4,001)              -              -
-----------------------------------------------------------------------------------------------------------

     Benefit obligation at end of year       $        -       $        -      $      517     $      767
===========================================================================================================

Change in Plan Assets:
     Fair value of assets at beginning of
       year                                  $        -       $    3,450      $        -     $        -
     Actual return on plan assets                     -               94               -              -
     Employer contribution                            -              457               -              -
     Benefits paid                                    -           (4,001)              -              -
-----------------------------------------------------------------------------------------------------------
     Fair value of plan assets at end of
       year                                  $        -       $        -      $        -     $        -
===========================================================================================================


     Funded status                                    -                -             517            767
     Unrecognized net actuarial gain                  -                -             370             24
-----------------------------------------------------------------------------------------------------------

Accrued benefit cost                         $        -       $        -      $      887     $      791
===========================================================================================================


Weighted-average assumptions:

     Discount rate                                    -                -           7.75%           6.50%
===========================================================================================================
</TABLE>

Net periodic pension and other post-retirement medical benefit costs include the
following components:
<TABLE>
<CAPTION>
                                                                                   Post-Retirement
                                                  Retirement Plan                    Medical Plan
                                          -----------------------------------------------------------------
                                                 Fiscal Year Ended                Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                             January 29,    January 30,      January 29,    January 30,
(In thousands)                                  2000            1999             2000           1999
-----------------------------------------------------------------------------------------------------------

Components of net periodic benefit cost:
     <S>                                     <C>              <C>              <C>           <C>
     Service cost                            $        -       $        -       $     90      $    119
     Interest cost                                    -                -             30            40
     Recognized net actuarial gain                    -                -            (25)            -
     Loss due to settlement of plan                   -            1,100              -             -
-----------------------------------------------------------------------------------------------------------

     Net periodic benefit cost               $        -       $    1,100       $     95      $    159
===========================================================================================================
</TABLE>

Assumed  health care cost trend rates have a  significant  effect on the amounts
reported for the Post-Retirement Medical Plan. A one-percentage-point  change in
the assumed health care cost trend rates would have the following effects:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                 1-Percentage Point              1-Percentage Point
                                                      Increase                        Decrease
-----------------------------------------------------------------------------------------------------------

<S>                                                     <C>                             <C>
Effect on total of service and interest
    cost components                                     $  15                           $ (13)
Effect on postretirement medical benefit
    obligation                                          $  61                           $ (53)

-----------------------------------------------------------------------------------------------------------
</TABLE>

In  1994,  the  Company  established  a  non-contributory  defined  contribution
retirement  plan for certain key  employees.  Under the plan,  the Company funds
annual retirement  contributions for the designated participants on an after-tax
basis. For fiscal years 1999, 1998 and 1997, the Company's  contribution equaled
5% of  participants'  base  salary.  Participants  become  fully vested in their
contribution  accounts at the end of the fiscal year in which they complete four
years of service. The Company's expense under this plan was $0.5 million in each
of fiscal years 1999, 1998 and 1997.

Under the  Company's  401(k)  Savings  Plans,  participating  employees may make
pre-tax  contributions  up to 15% of covered  compensation.  The Company matches
employee  contributions at 100% of the first one percent of covered compensation
and 50% of the next four  percent and is payable as of the end of each  calendar
quarter. The Company's expense under these plans was $2.2 million,  $1.8 million
and $1.8 million in fiscal years 1999, 1998 and 1997, respectively.

Note 13 - Restructuring Reserve and Store Closures and Other Charges Reserve

The following is a summary of the  restructuring  reserve and store closures and
other charges reserve:

<TABLE>
<CAPTION>
------------------------------------------------------------------- ------------------ -------------------
                                                                                          Fiscal 1997
                                                                       Fiscal 1993       Store Closures
                                                                      Restructuring    and Other Charges
(In thousands)                                                           Reserve            Reserve
------------------------------------------------------------------- ------------------ -------------------

<S>                                                                   <C>                <C>
Fiscal Year Ended January 30, 1999                                    $    5,927         $    16,452

Cash expenditures incurred during the year                                (2,500) (1)         (1,934) (2)

Reserve re-evaluation adjustment                                           3,347              (3,347)
------------------------------------------------------------------- ------------------ -------------------

Fiscal Year Ended January 29, 2000                                    $    6,774  (3)    $    11,171  (4)
=================================================================== ================== ===================
</TABLE>

(1)  Cash expenditures  during the year consisted primarily of lease obligations
     on closed  facilities and costs associated with the closure in July 1999 of
     an older, under-performing store
(2)  Cash expenditures  during the year consisted primarily of lease obligations
     on closed facilities and other related operating costs.
(3)  The ending balance consists primarily of lease obligations on closed
     facilities, which extend through 2006.
(4)  The ending balance consists primarily of lease obligations on closed
     facilities, which extend through 2011.

In October 1997, the Board of Directors  approved an accelerated growth strategy
that provided for a more rapid  completion  of its store remodel  program and an
increased rate for new store  openings.  In connection  with this strategy,  the
Board of Directors also approved the closure of three  under-performing  stores.
In the third quarter of fiscal 1997,  the Company  recorded  store  closures and
other  charges of $27.0 million  consisting of $22.3 million for store  closures
and other related  settlement costs,  $1.7 million in asset impairment  charges,
and a $3.0  million  increase  in the  fiscal  1993  restructuring  reserve  for
additional  lease  obligations  due to delays in  obtaining  subleases  on terms
acceptable  to the  Company.  Costs  included in the reserve for store  closures
primarily  include lease  obligations on closed or yet to be closed  facilities,
write-downs of fixed assets and other related settlement costs.

In accordance with SFAS No. 121,  long-lived assets held and used by the Company
are reviewed for impairment whenever events or changes in circumstances indicate
that the  carrying  amount of an asset may not be  recoverable.  For purposes of
evaluating the recoverability of long-lived  assets, the recoverability  test is
performed  using  undiscounted  net cash  flows of the  individual  stores.  The
Company's  quarterly  SFAS No. 121 analysis  performed  in the third  quarter of
fiscal 1997 indicated  that the  long-lived  assets at two stores were impaired.
Accordingly, the Company estimated the fair value of these assets based on their
estimated salvage value and recorded an impairment charge of $1.7 million, which
is included in "Store closures and other charges" in the consolidated  statement
of income.

Note 14 - Commitments and Contingencies

The Company is involved in various legal  proceedings  incident to the character
of its  business.  Although  it is not  possible to predict the outcome of these
proceedings,  or any claims  against the Company  related  thereto,  the Company
believes that such proceedings will not, individually or in the aggregate,  have
a material  adverse  effect on either its financial  condition,  cash flows,  or
results of operations.

Note 15 - Selected Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
Fiscal Year ended January 29, 2000:                                   Quarter Ended
--------------------------------------------- --------------- -------------- -------------- --------------
                                                  May 1,        July 31,      October 30,    January 29,
(In thousands, except per share data)              1999           1999           1999           2000
--------------------------------------------- --------------- -------------- -------------- --------------

  <S>                                         <C>              <C>           <C>             <C>
  Net sales                                   $   365,293      $   453,667   $   379,167     $   327,148
  Gross profit                                     78,297          100,603        82,931          66,979
  Income (loss) from operations                     2,149           16,712         6,350          (4,584)
  Income (loss) before extraordinary gain             653           10,153         3,853          (3,830)
  Net income (loss)                                   653           10,153         3,853          (2,031)

  Basic net income per share:
   Income (loss) before extraordinary gain    $      0.02      $      0.27   $      0.10    $     (0.10)
   Extraordinary gain                                   -                -             -           0.05
   Net income                                 $      0.02      $      0.27   $      0.10    $     (0.05)

  Diluted net income per share:
   Income (loss) before extraordinary gain    $      0.02      $      0.23   $      0.10    $     (0.10)
   Extraordinary gain                                   -                -             -           0.05
   Net income                                 $      0.02      $      0.23   $      0.10    $     (0.05)
--------------------------------------------- --------------- -------------- -------------- --------------

Fiscal Year ended January 30, 1999:                                   Quarter Ended
--------------------------------------------- --------------- -------------- -------------- --------------
                                                  May 2,        August 1,     October 31,    January 30,
(In thousands, except per share data)              1998           1998           1998           1999
--------------------------------------------- --------------- -------------- -------------- --------------

  Net sales                                   $   348,897      $   424,625   $   360,067     $   308,753
  Gross profit                                     76,937           97,417        79,800          63,937
  Income from operations                               91           14,693         7,165             414
  Net income                                           91           14,693         7,165             414

  Net income per share:
   Basic                                      $         -      $      0.39   $      0.19    $      0.01
   Diluted                                    $         -      $      0.32   $      0.17    $      0.01
--------------------------------------------- --------------- -------------- -------------- --------------
</TABLE>

Net income for the first quarter of fiscal 1998 includes a $1.1 million charge,
before taxes, related to the termination of the Waban Inc. Retirement Plan.

In fiscal 1999 and 1998,  the  quarterly per share amounts do not sum to the per
share amounts for the respective  year-to-date periods due to differences in the
weighted average number of shares outstanding in each quarterly reporting period
versus the weighted  average  number of shares  outstanding  for the  respective
year-to-date periods.




Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

None



<PAGE>


                                    PART III

Item 10. Directors and Executive Officers of the Registrant

The Company will file with the Securities  and Exchange  Commission a definitive
Proxy  Statement no later than 120 days after the close of its fiscal year ended
January 29, 2000 (the "Proxy Statement").  The information required by this Item
that is not set forth  below or under the  heading  "Executive  Officers  of the
Registrant" in Part I of this report is incorporated  herein by reference to the
Proxy Statement.

Item 11. Executive Compensation

The information required by this Item is incorporated herein by reference to the
Proxy Statement.  However,  information under "Executive  Compensation Committee
Report" and "Performance Graph" in the Proxy Statement is not so incorporated.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated herein by reference to the
Proxy Statement.

Item 13. Certain Relationships and Related Transactions

The information required by this Item is incorporated herein by reference to the
Proxy Statement.


<PAGE>


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on 8-K

A. The Financial  Statements and Financial  Statement Schedules filed as part of
this report are listed and indexed on page 19. Schedules other than those listed
in the index have been omitted  because they are not included  elsewhere in this
report.

B. Listed below are all exhibits filed as part of this report.  Certain exhibits
are  incorporated by reference to documents  previously  filed by the Registrant
with the  Securities and Exchange  Commission  pursuant to Rule 12b-32 under the
Securities Exchange Act of 1934, as amended.

Exhibit
No.            Exhibit
-------------- -----------------------------------------------------------------
3.1            Amended and Restated  Certificate of Incorporation of the Company
               (incorporated  herein by reference to the  Registrant's  Form S-8
               (#333-32473), dated July 30, 1997).
3.2            By-Laws, as Amended, of the Company  (incorporated herein by
               reference to the Registrant's Form S-8 (#333-32473), dated July
               30, 1997).
4.0            Instruments Defining Rights of Security Holders (See Exhibits
               3.1, 3.2, 4.7 and 10.13).
4.1            Specimen  Common  Stock  Certificate  (incorporated  herein by
               reference to the Registrant's Form S-3 (Registration No.
               333-43789), dated February 10, 1998).
4.2            5.25%  Convertible  Subordinated  Note (Rule 144A)  (incorporated
               herein by reference to the  Registrant's  Form S-3  (Registration
               No. 333-43789), dated February 10, 1998).
4.3            5.25% Convertible Subordinated  Note (Regulation S) (incorporated
               herein by reference to the Registrant's Form S-3 (Registration
               No. 333-43789), dated February 10, 1998).
4.4            Indenture, dated as of November 10, 1997, between the Company and
               State  Street  Bank  and  Trust  Company  of   California,   N.A.
               (incorporated  herein by reference to the  Registrant's  Form S-3
               (Registration No. 333-43789), dated February 10, 1998).
4.5            Registration  Rights Agreement, dated as of November 10, 1997, by
               and between the Company and  Prudential  Securities  Incorporated
               (incorporated herein by  reference  to  the Registrant's Form S-3
               (Registration No. 333-43789), dated February 10, 1998).
4.6            Purchase  Agreement,  dated as of December 10, 1997,  between the
               Company  and  Prudential  Securities  Incorporated  (incorporated
               herein by reference to the  Registrant's  Form S-3  (Registration
               No. 333-43789), dated February 10, 1998).
4.7            Rights  Agreement  dated as of April 6, 1999 between the Company
               and First  Chicago  Trust Company  of New York  (incorporated
               herein  by  reference  to the  Registrant's  Form 8-A
               (Registration No. 001-10259), dated April 6, 1999).
4.8            5.25% Convertible Subordinated Note (Registered)  (incorporated
               herein by reference to the Registrant's Form S-3 (Registration
               No. 333-43789), dated February 10, 1998).
10.0 *         Change of Control  Severance  Benefit  Plan for Key  Employees,
               dated January 28, 1998  (incorporated  herein by reference to the
               Registrant's Form S-3 (Registration No.
               333-43789), dated February 10, 1998).
10.1 *         HomeBase,   Inc.  1989  Stock   Incentive   Plan,  as  amended
               (incorporated  herein by reference to the Registrant's  Form 10-Q
               (File No. 1-10259), dated July 26, 1997).
10.2 *         Waban Inc. Executive  Retirement Plan  (incorporated  herein by
               reference to the Registrant's Form 10-K for the fiscal year ended
               January 29, 1994).
10.3 *         Waban Inc. Retirement Plan for Directors,  as amended September
               17, 1990  (incorporated  herein by reference to the  Registrant's
               Form 10-Q for the fiscal quarter ended October 27, 1990).
10.4 *         Waban Inc. General  Deferred  Compensation  Plan  (incorporated
               herein by reference to the Registrant's  Form 10-K for the fiscal
               year ended January 27, 1990).
10.5 *         Waban Inc.  Growth  Incentive  Plan,  as amended  (incorporated
               herein by reference to the Registrant's  Form 10-K for the fiscal
               year ended January 27, 1990).
10.6 *         Amendment  dated as of January 29, 1994 between the Company and
               The TJX  Companies,  Inc. to Executives  Services  Agreement with
               respect to Arthur F. Loewy  (incorporated  herein by reference to
               the Registrant's  Form 10-K for the fiscal year ended January 29,
               1994).
10.7 *         Employment  Agreement dated as of July 28, 1997 with Herbert J.
               Zarkin (incorporated herein by reference to the Registrant's Form
               10-Q (File No. 1-10259), dated July 26, 1997).
10.8 *         Employment  Agreement  dated as of July 28, 1997 with Edward J.
               Weisberger (incorporated herein by reference  to the Registrant's
               Form 10-Q (File No. 1-10259), dated July 26, 1997).
10.9 *         Employment  Agreement  dated as of July 28, 1997 with Allan P.
               Sherman  (incorporated  herein by reference  to the  Registrant's
               Form 10-Q (File No. 1-10259), dated October 25, 1997).
10.9.1 *       Loan  Agreement  dated as of  January  19,  1994 with  Allan P.
               Sherman  (incorporated  herein by reference  to the  Registrant's
               Form 10-K for the fiscal year ended January 29, 1994).
10.9.2 *       Promissory  Note  dated as of January  19,  1994 with Allan P.
               Sherman to the Company  (incorporated  herein by reference to the
               Registrant's  Form 10-K for the  fiscal  year ended  January  29,
               1994).
10.10 *        Employment Agreement,  dated as of July 28, 1997 with Thomas F.
               Gallagher  (incorporated  herein by reference to the Registrant's
               Form 10-Q (File No. 1-10259), dated July 26, 1997).
10.11 *        Employment  Agreement,  dated as of July 28,  1997 with  Scott
               Richards  (incorporated  herein by reference to the  Registrant's
               Form 10-Q (File No. 1-10259), dated July 26, 1997).
10.12 *        Employment Agreement, dated as of July 28, 1997 with William B.
               Langsdorf  (incorporated  herein by reference to the Registrant's
               Form 10-Q (File No. 1-10259), dated July 26, 1997).
10.13 *        Form of  Indemnification  Agreement between the Company and its
               officers and directors  (incorporated  herein by reference to the
               Registrant's  Form 10-K for the  fiscal  year ended  January  27,
               1990).
10.14 *        Form of Change  of  Control  Severance  Agreement  between  the
               Company  and  officers  of the  Company  (incorporated  herein by
               reference to the Registrant's Form 10-Q (File No.
               1-10259), dated July 26, 1997).
10.15          Credit Agreement dated  as of  July  9, 1997  among  the  Company
               and  certain  banks (incorporated herein by reference to the
               Registrant's Form 10-Q (File No. 1-10259), dated July 26, 1997).
10.15.1        First Amendment to Credit Agreement, dated October 28, 1997 among
               the Company and certain banks  (incorporated  herein by reference
               to the Registrant's  Form 10-K (File No. 1-10259),  dated January
               31, 1998).
10.15.2        Second  Amendment  to Credit  Agreement,  dated  November 7, 1997
               among the  Company  and  certain  banks  (incorporated  herein by
               reference to the Registrant's Form 10-K (File No. 1-10259), dated
               January 31, 1998).
10.15.3        Third  Amendment  to Credit  Agreement,  dated  December 24, 1997
               among the  Company  and  certain  banks  (incorporated  herein by
               reference to the Registrant's Form 10-K (File No. 1-10259), dated
               January 31, 1998).
10.16 *        Waban Inc. 1995 Director Stock Option Plan (incorporated herein
               by reference to the  Registrant's  definitive  Proxy Statement on
               Schedule 14A (File No. 1-10259) for the Registrant's  1995 Annual
               Meeting of Stockholders).
10.17          Separation and Distribution Agreement, dated as of July 10, 1997,
               between the Company and BJ's Wholesale Club, Inc.  (incorporated
               herein by reference to the Registrant's Form 8-K (File No.
               1-10259), dated July 28, 1997).
10.18          Services  Agreement,  dated as of July 28,  1997,  between the
               Company and BJ's  Wholesale Club,  Inc.  (incorporated  herein by
               reference to the Registrant's  Form 8-K (File No. 1-10259), dated
               July 28, 1997).
10.19          Tax Sharing  Agreement,  dated as of July 28,  1997,  between the
               Company and BJ's Wholesale  Club,  Inc.  (incorporated  herein by
               reference to the Registrant's Form 8-K (File No.
               1-10259), dated July 28, 1997).
10.20 *        Employee Benefits Agreement, dated as of July 28, 1997, between
               the Company and BJ's Wholesale Club, Inc. (incorporated herein by
               reference to the Registrant's Form 8-K (File No. 1-10259),  dated
               July 28, 1997).
10.21 *        HomeBase,  Inc. 1997 Stock Incentive Plan (incorporated  herein
               by reference to the  Registrant's  Form 10-Q (File No.  1-10259),
               dated July 26, 1997).
10.22 *        Change of Control  Severance  Agreement,  dated August 31, 1998
               with Herbert J. Zarkin  (incorporated  herein by reference to the
               Registrant's  Form 10-Q (File No.  1-10259),  dated  October  31,
               1998).
10.23 *        Employment Agreement,  dated June 1, 1998 with Allan P. Sherman
               (incorporated  herein by reference to the Registrant's  Form 10-Q
               (File No. 1-10259), dated October 31, 1998).
10.24 *        Change of Control  Severance  Agreement,  dated August 31, 1998
               with Allan P.  Sherman  (incorporated  herein by reference to the
               Registrant's  Form 10-Q (File No.  1-10259),  dated  October  31,
               1998).
10.25 *        Change of Control  Severance  Agreement,  dated August 31, 1998
               with Thomas F. Gallagher (incorporated herein by reference to the
               Registrant's  Form 10-Q (File No.  1-10259),  dated  October  31,
               1998).
10.26 *        Change of Control  Severance  Agreement,  dated August 31, 1998
               with William B.  Langsdorf  (incorporated  herein by reference to
               the Registrant's Form 10-Q (File No. 1-10259),  dated October 31,
               1998).
10.27 *        Change of Control  Severance  Agreement,  dated August 31, 1998
               with Scott L. Richards  (incorporated  herein by reference to the
               Registrant's  Form 10-Q (File No.  1-10259),  dated  October  31,
               1998).
10.28 *        Change of Control  Severance  Agreement,  dated August 31, 1998
               with Edward J.  Weisberger  (incorporated  herein by reference to
               the Registrant's Form 10-Q (File No. 1-10259),  dated October 31,
               1998).
10.29 *        Change of Control  Severance  Benefit  Plan for Key  Employees,
               dated  August 31, 1998  (incorporated  herein by reference to the
               Registrant's  Form 10-Q (File No.  1-10259),  dated  October  31,
               1998).
10.30 *        HomeBase,  Inc.  Executive  Retirement  Plan,  First Amendment,
               dated  August 31, 1998  (incorporated  herein by reference to the
               Registrant's  Form 10-Q (File No.  1-10259),  dated  October  31,
               1998).
10.31 *        Equity Unit  Agreement,  dated February 8, 1999, with Thomas F.
               Gallagher  (incorporated  herein by reference to the Registrant's
               Form 10-K (File No. 1-10259), dated January 30, 1999).
10.32 *        Equity Unit Agreement,  dated February 8, 1999, with William B.
               Langsdorf  (incorporated  herein by reference to the Registrant's
               Form 10-K (File No. 1-10259), dated January 30, 1999).
10.33 *        Equity Unit  Agreement,  dated February 8, 1999,  with Scott L.
               Richards  (incorporated  herein by reference to the  Registrant's
               Form 10-K (File No. 1-10259), dated January 30, 1999).
10.34 * #      Replacement Equity Unit Agreement, dated December 9, 1999, with
               John L. Price.
10.35 * #      Agreement and Release of All Claims with Allan P. Sherman, dated
               March 2, 2000.
10.36 * #      Amendment to Employment Agreement, dated March 2, 2000, with
               Herbert J. Zarkin
21.0 #         Subsidiaries of the Company.
23.0 #         Consent of Independent Accountants.
27.0 #         Financial Data Schedule--Fiscal 2000.

*              Management contract or other compensatory plan or arrangement.
#              Filed herewith.


               Reports on Form 8-K
               -----------------------------------------------------------------

               On November  11,  1999,  the  Company  filed a report on Form 8-K
               which  coincided with a press release  announcing the preliminary
               results  for the third  quarter  ended  October 30,  1999,  of an
               underwritten   commitment  it  had  obtained  for  a  new  senior
               collateralized  five-year, $250 million revolving line of credit,
               of a $20  million  stock and note  repurchase  program and of the
               creation of a preliminary new merchandising concept.

               On December 8, 1999, the Company filed a report on Form 8-K which
               coincided  with a press  release  announcing  the  closing  of an
               agreement for a new senior collateralized  five-year $250 million
               revolving  line of  credit  facility,  led by  BankBoston  Retail
               Finance Inc.

               On March 7, 2000,  the  Company  filed a report on Form 8-K which
               coincided  with a press  release  reporting  that  the  Board  of
               Directors  has  named  Herbert  J.  Zarkin  President  and  Chief
               Executive Officer to succeed Allan P. Sherman,  who resigned from
               these positions and as a Director of the Company.


<PAGE>


                                   SIGNATURES

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

                                                      HomeBase, Inc.


Dated April 11, 2000                              By: /s/ Herbert J. Zarkin
                                                      --------------------------
                                                          Herbert J. Zarkin
                                                          Chairman of the Board,
                                                          President and Chief
                                                          Executive Officer


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

<TABLE>
<CAPTION>
       Signature                           Title                                          Date
-----------------------------------------------------------------------------------------------------------

    <S>                                    <C>                                             <C>
    /s/ HERBERT J. ZARKIN                  Chairman of the Board, President, Chief         April 11, 2000
    ---------------------------------
           Herbert J. Zarkin               Executive Officer of the Company and Director
                                           (Principal Executive Officer)

    /s/ WILLIAM B. LANGSDORF               Executive Vice President, Chief Financial       April 11, 2000
    ---------------------------------
           William B. Langsdorf            Officer (Principal Financial Officer and
                                           Principal Accounting Officer)

    /s/ JOHN D. BARR                       Director                                        April 11, 2000
    ---------------------------------
           John D. Barr

    /s/ ROBERT W. COX                      Director                                        April 11, 2000
    ---------------------------------
           Robert W. Cox

    /s/ HAROLD LEPPO                       Director                                        April 11, 2000
    ---------------------------------
           Harold Leppo

    /s/ ERNEST T. KLINGER                  Director                                        April 11, 2000
    ---------------------------------
           Ernest T. Klinger

    /s/ LORNE R. WAXLAX                    Director                                        April 11, 2000
    ---------------------------------
           Lorne R. Waxlax

    /s/ EDWARD J. WEISBERGER               Director                                        April 11, 2000
    ---------------------------------
           Edward J. Weisberger
</TABLE>