================================================================================

                                 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 27, 2001
                                  -------------
                         Commission File Number 1-10259

                                HomeBase(R), 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 2, 2001 was $47,937,053.

There were 37,595,398  shares of the Registrant's  Common Stock, $.01 par value,
outstanding as of April 2, 2001.

                       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 I

Item 1. Business

General

HomeBase(R),  Inc. ("the  Company") is a retail  company which,  during the year
ended January 27, 2001,  operated 89 stores in 10 western states. At January 27,
2001, the Company had 84 HomeBase home  improvement  stores,  which average over
100,000  interior  square feet,  with an adjoining  nursery.  On that date,  the
Company  also  operated  five  House2Home(TM)   ("House2Home")  home  decorating
superstores in California and Nevada,  which also average over 100,000  interior
square  feet,  with an  adjoining  nursery  and garden  center.  The  Company is
currently in the process of closing its  HomeBase  stores and  converting  37 of
them into  House2Home  stores over the coming  months.  The  remaining  HomeBase
stores will be closed.

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 27, 2001,
January 29, 2000 and January 30, 1999 are  referred to herein as "fiscal  2000",
"fiscal 1999" and "fiscal 1998," respectively.

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.

The House2Home Concept

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.  Subsequently,  in February  2000,  the Company  disclosed its 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 Company grand opened five new  House2Home  home  decorating  superstores  on
September 9, 2000 in Foothill Ranch, Murrieta and Palm Desert,  California,  and
Las Vegas and Henderson, Nevada.

On December 5, 2000, as part of a major effort to effect a corporate  turnaround
and reposition  itself in the  marketplace,  the Company  announced its board of
directors  approved a plan to initiate a broad  expansion of the  Company's  new
House2Home  retail  concept,  reflecting a change in corporate  focus toward the
home decorating retail market.  The program was planned as a staggered 12 month,
eight-phase  roll out involving the conversion of 62 additional  HomeBase stores
to the House2Home  format and closing of the remaining 22 stores. In March 2001,
the Company  decided to scale back its  expansion  program so that a total of 42
House2Home  stores are expected to be open by the end of July 2001,  rather than
the 67 stores originally planned by the end of November 2001.

The  Company's  goal is to take a leadership  position in the highly  fragmented
home  furnishings  market that has no single dominant  competitor.  Representing
four  specialty  stores  under  one roof,  House2Home  is an  exciting  one-stop
shopping destination for everything that makes a house a home.

Spanning more than 100,000 square feet, House2Home offers an expansive selection
of specialty home decor products at value prices.  With  everything to beautify,
accessorize  and  personalize  the  inside  and  outside  of a home,  House2Home
incorporates a unique mix of four specialty businesses under one roof:

          Category                           Items Sold
          ---------                          -----------------------------------
          Outdoor living                     Patio furniture, Bar-B-Qs, nursery
                                             and garden, outdoor lighting,
                                             fountains and other decor.

          Indoor living                      Flooring, carpeting, lighting, wall
                                             and window coverings and selected
                                             furniture.

          Home decor and accessories         Tabletops, kitchen, storage,
                                             bedding  and  bath,  candles,  silk
                                             flowers,   picture   frames  and  a
                                             variety of other decorative items.

          Seasonal and party goods           A vast array of specialty items for
                                             all seasons and almost every
                                             occasion, with customized  balloon
                                             bouquets and party favors, as well
                                             as holiday merchandise.

Industry Outlook

The Company sees an opportunity in high-growth areas within the home furnishings
market that are identified as fragmented businesses, in which no single retailer
is dominant.  House2Home  offers consumers a shopping  experience with important
points of  differentiation,  including a unique mix of product  categories under
one roof,  a product  selection  that is as deep as it is broad,  an emphasis on
value  with a wide  range  of  price  points,  special  conveniences  and  added
services,  as well as excellent customer service.  The Company is unaware of any
other single retailer that competes directly with House2Home,  under the big box
format, in the moderately priced home decorating market.

Team Members

As of January 27,  2001,  the Company  had a total of  approximately  8,500 team
members,  including  approximately  540 who were  engaged in  various  corporate
administration   and  store  support   functions.   Included  in  the  total  is
approximately  3,500 team members at 31 stores  which were in various  stages of
liquidation  under the House2Home  conversion  program.  Of the Company's  total
personnel,  approximately 39% were considered  part-time  (working fewer than 33
hours per week). After the anticipated  completion of the House2Home  conversion
program in July 2001,  the  Company  expects  to have  approximately  7,000 team
members,  about  2,800 of whom will be  part-time  and about 400 of whom will be
engaged in various corporate administration and store support functions.

Merchandising

With 14 departments offering broad categories of home furnishings and home decor
goods,  each House2Home store regularly stocks over 30,000 brand name or private
label  items and  offers  thousands  of  special  order  products.  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 its
target customers.

The Company has a centralized  purchasing  function located within its Corporate
Support Center. The Company also maximizes its distribution efficiencies through
a  combination  of direct  shipments  from  vendors  to the  stores and from two
consolidation and distribution  centers, a 675,000 square foot center located in
Ontario,  California  and  a  200,000  square  foot  center  located  in  Rancho
Cucamonga, California.

Seasonality

Historically,  sales  and  earnings  for  the  Company's  HomeBase  stores  have
typically been higher in the second and third quarter of the fiscal year,  which
include the most active  seasons for home  improvement  sales,  and lower in the
first and fourth quarters.  Sales and earnings have also been impacted favorably
or adversely as a result of prevailing regional weather patterns. Sales patterns
for  House2Home  stores are expected to show similar  strength in the second and
third quarters due to the strong mix of nursery, garden, patio and barbecue, but
also show strength in December due to the Christmas season.  While the Christmas
season  tended  to be weak for home  improvement,  the  focus of the  House2Home
stores on holiday  and  seasonal  merchandise  should  make the  fourth  quarter
somewhat stronger than experienced at the HomeBase stores.

Marketing and Advertising

The Company  addresses its primary target customers  through a mix of newspaper,
direct mail,  radio and  television  advertising.  A key  advertising  medium is
newspaper advertisements through freestanding inserts.  Television and radio are
being used to build the  House2Home  brand and  enhance  its image of  providing
superior  customer  service and a broad assortment of merchandise at competitive
prices. 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.

Competition

The Company believes the House2Home  concept is  differentiated  from other home
furnishings retailers, serving as the home decorating superstore for the western
United  States.  The  unique  and  expansive  product  assortment  appeals  to a
relatively  large and broad  consumer  base. The Company is unaware of any other
retailer who has the product mix and selection,  and delivers it in this format.
The  HomeBase  business  has had  virtually a 100% overlap with two other larger
retailers in terms of selection,  format and style of service. In contrast,  the
House2Home  concept  has  direct  competition  for parts of the store  with many
retailers,  but the Company  believes that no single retailer  competes with the
majority  of the  store.  The two big box  retailers  in the west that  could be
considered  competition,  Home  Depot's  Expo and Sears'  Great  Indoors,  carry
generally  higher-end or special order  merchandise,  primarily for larger-scale
home remodeling projects.  Department stores generally do not carry the depth of
product selection that House2Home does, and other specialty  retailers (e.g. Bed
Bath and Beyond, Michaels, Pier1 Imports,  Barbeques Galore, Office Depot, etc.)
do not offer the variety of product  categories that House2Home offers under one
roof.

Item 2. Properties

As of January 27, 2001, the Company had 84 HomeBase  stores and five  House2Home
stores,  with 71 leased  under  long-term  leases  and 18 which are  owned.  The
unexpired  terms of the leases  range from  approximately  one to 19 years,  and
average  approximately  nine 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.
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
before the chain-wide  conversion to House2Home  began in December 2000; and the
expected  number of stores and  locations  after the  conversion is completed in
July 2001:

<TABLE>
<CAPTION>
           ------------------------------------------------------------------
                                     Number of Stores
           ------------------------------------------------------------------
                   Before Conversion                After Conversion
           ------------------------------------------------------------------
             (Actual)                         (Expected)
State       House2Home  HomeBase   Total      House2Home  HomeBase  Total
-----------------------------------------------------------------------------

<S>              <C>       <C>       <C>          <C>        <C>      <C>
California       3         48        51           35         -        35
Washington       -          9         9            -         -         -
Colorado         -          7         7            -         -         -
Arizona          -          6         6            5         -         5
Oregon           -          4         4            -         -         -
Nevada           2          1         3            2         -         2
New Mexico       -          3         3            -         -         -
Utah             -          3         3            -         -         -
Texas            -          2         2            -         -         -
Idaho            -          1         1            -         -         -
-----------------------------------------------------------------------------

   Total         5         84        89           42         -        42
=============================================================================
</TABLE>

The average size of the Company's 89 stores in operation at January 27, 2001 was
approximately  100,000 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.

Of the 47  former  HomeBase  locations  which are not  expected  to  re-open  as
House2Home  stores, 14 are owned by the Company and the remaining 33 are leased.
The Company  intends to seek buyers of the owned locations and to attempt either
to negotiate lease  terminations or to find replacement  tenants for most of the
leased locations (with the exception of a small number of leases which will soon
expire). See Note 16 in the Notes to Consolidated Financial Statements.

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.


<PAGE>


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 2000.




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 May 31, 2001.

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             62    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           49    Executive Vice President,  Store Operations since July 1997;  Executive
                                    Vice  President,  Store  Operations  of the HomeBase  division  (1996 -
                                    1997).

William B. Langsdorf          44    Executive Vice President and Chief  Financial  Officer since July 1997;
                                    Senior Vice President, Finance of the HomeBase division (1993 - 1997).

Scott L. Richards             43    Executive  Vice  President,  Merchandising  since July 1997;  Executive
                                    Vice President, Merchandising of the HomeBase division (1996 - 1997).

John L. Price                 51    Vice  President,   General  Counsel  and  Secretary  since  July  1997;
                                    Assistant  General  Counsel of 20th  Century
                                    Industries (1995 - 1997).

---------------------------- ------ ------------------------------------------------------------------------
</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 27, 2001 and January 29, 2000:

<TABLE>
<CAPTION>
----------------- ------------------------------- ------------------------------
                         Fiscal Year Ended                Fiscal Year Ended
Quarters                  January 27, 2001                January 29, 2000
----------------- ------------------------------- ------------------------------

<S>                     <C>             <C>            <C>            <C>
                        High            Low            High           Low
                        ----            ----           ----           ----
First                   3.19            1.88           6.75           4.06
Second                  2.94            1.50           6.94           4.88
Third                   2.94            1.75           5.88           3.56
Fourth                  2.94            0.75           4.00           2.88
----------------- --------------- --------------- -------------- ---------------
</TABLE>


The number of stockholders of record at April 2, 2001 was 3,150.

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 Credit  Facility does not permit the Company to pay cash dividends.
See Note 5 in the Notes to Consolidated Financial Statements.



<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  27,  2001 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 27,  January 29,    January 30,   January 31,  January 25,
(Dollars in thousands, except per share data)                 2001          2000           1999         1998          1997
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                    (53 Weeks)
Income Statement Data:
<S>                                                         <C>          <C>           <C>           <C>          <C>
  Net sales                                                 $1,439,598   $1,525,275    $1,442,341    $1,477,442   $1,452,696

  Cost of sales, including buying and occupancy costs        1,235,419    1,196,465     1,124,250     1,159,253    1,136,997
--------------------------------------------------------------------------------------------------------------------------------
  Gross profit                                                 204,179      328,810       318,091       318,189      315,699

  Selling, general and administrative expenses                 312,824      304,457       278,232       285,773      273,440
  Pre-opening expenses                                           5,634        3,726           919         1,408        4,401
  Store closures and other charges (credits)                    (6,450)           -             -        27,000            -
--------------------------------------------------------------------------------------------------------------------------------
  Operating income (loss)                                     (107,829)      20,627        38,940         4,008       37,858

  Interest on debt and capital leases, net                       4,838        3,440         2,817         5,136       10,506
--------------------------------------------------------------------------------------------------------------------------------
  Income (loss) from continuing operations before income
     taxes and extraordinary gain                             (112,667)      17,187        36,123        (1,128)      27,352

  Provision (benefit) for income taxes                         (41,687)       6,358        13,760          (445)      11,005
--------------------------------------------------------------------------------------------------------------------------------
  Income (loss) from continuing operations before
     extraordinary gain                                        (70,980)      10,829        22,363          (683)      16,347


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

  Extraordinary gain (loss) on early extinquishment of
     debt, net of income tax provision (benefit)                   576        1,799             -        (8,663)           -
--------------------------------------------------------------------------------------------------------------------------------

  Net income (loss)                                         $  (70,404)  $   12,628    $   22,363    $   11,229   $   76,660
================================================================================================================================

Basic net income (loss) per share (1):
  Income (loss) from continuing operations before
     extraordinary gain (loss)                              $    (1.89)  $     0.28    $     0.59    $    (0.02)  $     0.50
  Income from discontinued operations                                -            -             -           0.57        1.83
  Extraordinary gain (loss)                                       0.02         0.05             -          (0.24)          -
--------------------------------------------------------------------------------------------------------------------------------

  Net income (loss)                                         $    (1.87)  $     0.33    $     0.59    $      0.31  $     2.33
================================================================================================================================

Diluted net income (loss) per share (1):
  Income (loss) from continuing operations before
     extraordinary gain (loss)                              $    (1.89)  $     0.28    $     0.54    $     (0.02) $     0.49
  Income from discontinued operations                                -            -             -           0.57        1.82
  Extraordinary gain (loss)                                       0.02         0.05             -          (0.24)          -
--------------------------------------------------------------------------------------------------------------------------------

  Net income (loss)                                         $     (1.87) $     0.33    $     0.54    $      0.31  $     2.31
================================================================================================================================

Shares used in computation of net income (loss) per share:
  (In thousands)
    Basic                                                       37,599       37,849        37,845        35,770       32,839
    Diluted                                                     37,599       37,936        48,013        35,770       33,205

Balance Sheet Data:
Working capital                                             $  158,899   $  267,698    $  261,930    $  240,828   $  275,842
Net assets of discontinued operations (2)                            -            -             -             -      423,688
Total assets                                                   584,711      727,742       728,982       715,608    1,077,059
Long-term debt and obligations under capital leases             98,222      100,749       115,659       115,963      242,548
Stockholders' equity                                           324,638      394,686       382,499       359,667      631,925

Stores open at end of period                                        89           88            84            83           84
================================================================================================================================
</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 27, 2001,
January 29, 2000 and January 30, 1999 are  referred to herein as "fiscal  2000",
"fiscal 1999" and "fiscal 1998", respectively.

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



<TABLE>
<CAPTION>
                                                                      Fiscal Year Ended
----------------------------------------------------------------------------------------------------------
                                                        January 27,      January 29,      January 30,
                                                           2001              2000             1999
----------------------------------------------------------------------------------------------------------

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

Cost of sales, including buying and occupancy
   costs                                                        85.8              78.4             77.9
----------------------------------------------------------------------------------------------------------
Gross profit                                                    14.2              21.6             22.1

Selling, general and administrative expenses                    21.7              20.1             19.3
Pre-opening expenses                                             0.4               0.2              0.1
Store closures and other charges (credits)                      (0.4)                -                -
----------------------------------------------------------------------------------------------------------
Operating income (loss)                                         (7.5)              1.3              2.7

Interest on debt and capital leases, net                         0.3               0.2              0.2
----------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and
   extraordinary gain                                           (7.8)              1.1              2.5

Provision (benefit) for income taxes                            (2.9)              0.4              0.9
----------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary gain                         (4.9)              0.7              1.6

Extraordinary gain on early extinguishment of
   debt, net of income taxes                                       -               0.1                -
----------------------------------------------------------------------------------------------------------

Net income (loss)                                               (4.9)%             0.8%             1.6%
==========================================================================================================
</TABLE>


Fiscal Year Ended January 27, 2001 (Fiscal 2000) Compared to Fiscal Year Ended
January 29, 2000 (Fiscal 1999)

Net Sales

Net sales for fiscal 2000 were $1,439.6  million compared to $1,525.3 million in
fiscal 1999, a decrease of 5.6%.  Comparable  sales decreased 11.5% for HomeBase
stores that had not begun liquidation  sales at year-end,  primarily as a result
of a decline in the number of  transactions.  This  compares with an increase in
comparable  sales last year of 1.4% with 88 stores in operation.  At January 27,
2001, the Company had 38 HomeBase stores in various stages of liquidation.

Gross Profit

Gross profit in fiscal 2000 was 14.2% of net sales versus 21.6% for fiscal 1999.
During  fiscal  2000,  gross  profit  included  a $55  million  charge  for  the
liquidation  of  inventory  at all 84  HomeBase  stores and zero  margins on the
liquidation sales at 39 stores during a portion of the fourth quarter.

Selling, General and Administrative Expenses

Selling,  general and  administrative  expenses ("SG&A") were 21.7% of net sales
compared with 20.1% for fiscal 2000 and fiscal 1999, respectively.  As announced
in a December 5, 2000 press release, the Company accelerated the depreciation of
fixed assets totaling  approximately  $34 million for its 84 HomeBase stores. In
fiscal  2000,  $15.4  million  was  charged  in the  fourth  quarter  related to
accelerated depreciation.

Pre-opening Expenses

The Company  incurred  $5.6 million in fiscal 2000 to develop and  construct the
five  House2Home  test stores,  which opened in September 2000. This compares to
$3.7 million in fiscal 1999 for the opening of five HomeBase stores.

Store Closures and Other Charges (Credits)

The  Company  recorded  a pre-tax  gain of $6.5  million  from the  reversal  of
reserves previously  established for three stores. These included a closed store
for  which  a lease  settlement  was  reached,  a  closed  store  reopened  as a
House2Home  store and another store for which a favorable lease  termination was
negotiated

Interest on Debt and Capital Leases, Net

Interest  on debt and  capital  leases,  net,  was $4.8  million in fiscal  2000
compared to $3.4 million in fiscal 1999.  Interest on debt and capital leases is
presented net of interest and investment income of $2.9 million and $4.7 million
in fiscal 2000 and 1999, respectively.

Income Tax Provision (Benefit)

The income tax rate on income (loss) from  operations  was 37.0% for both fiscal
2000 and fiscal 1999 and reflects the  realization of certain federal income tax
credits.  For fiscal  2001,  the Company  expects the tax  provision  rate to be
37.0%.

Income (Loss) Before Extraordinary Gain

The loss before  extraordinary gain for fiscal 2000 was $71.0 million,  or $1.89
per  share,  diluted,  compared  to income  before  extraordinary  gain of $10.8
million, or $0.28 per share, diluted, in fiscal 1999.

Net Income (Loss)

The net loss for fiscal  2000 was $70.4  million,  or $1.87 per share,  diluted,
compared to net income of $12.6 million, or $0.33 per share,  diluted, in fiscal
1999.   Net  income   (loss)  for  fiscal  2000  and  fiscal  1999  included  an
extraordinary  after-tax gain of $0.6 million,  or $0.02 per share,  diluted and
$1.8 million, or $0.05 per share, diluted,  respectively. The extraordinary gain
is associated with the Company's  repurchase of its convertible  notes.  The net
loss in fiscal  2000  compared  to net income in fiscal 1999 was the result of a
$55 million pre-tax charge for the  liquidation  of inventory,  $15.4 million in
accelerated  depreciation of fixed assets, $5.6 million in pre-opening  expenses
to develop and construct the five House2Home test stores and a deterioration  in
comparable store sales.


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 on income  from  continuing  operations  was 37.0% in fiscal
1999  compared to 38.1% in fiscal  1998.  The decrease in the income tax 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.

Income Before Extraordinary Gain

Income before extraordinary gain 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.


Liquidity and Capital Resources

House2Home Conversion

On December 5, 2000,  HomeBase Inc. initiated a broad expansion of the Company's
House2Home(TM) retail concept, reflecting a change in corporate focus toward the
home decorating retail market.

As part of its repositioning,  the Company announced that it planned to exit the
home improvement sector,  converting  approximately 60 of its HomeBase stores to
the House2Home format and closing the remaining stores. The store conversion, as
announced,  was planned to roll out in a staggered,  eight-phase schedule over a
12-month period.

On February 23, 2001, the Company  amended its $250 million  credit  facility to
provide  added  flexibility  to  support  the  conversion  program by adding the
Company's  unencumbered  owned  stores to the  collateral  base to increase  the
borrowing availability.

Subsequently,  on March 27,  2001,  the Company  announced  it would  modify its
House2Home expansion program by reducing the number of store conversions.  Under
the revised  schedule,  the 26 stores in phases six  through  eight would not be
converted and will close permanently upon completion of the liquidation process.
In total, the Company will operate approximately 42 House2Home stores at the end
of fiscal 2001 and close approximately 47 HomeBase stores.  Coinciding with this
announcement,  the  Company  entered  into  an  underwritten  commitment  letter
agreement with a financial institution to obtain up to an additional $50 million
in financing.

As of March 31, 2001, the Company had completed liquidation sales at 31 HomeBase
stores with the remaining 53 stores in various stages of liquidation. Phases one
through five of the program are proceeding as planned, with 17 House2Home stores
scheduled to grand open in May throughout  the greater Los Angeles  metropolitan
area.

Financial Impact

The financial  impact of the  conversion  program began in the fourth quarter of
fiscal 2000. The Company recorded a charge of $55 million for the liquidation of
inventory at all 84 remaining  HomeBase stores. The Company also accelerated the
depreciation of fixed assets for its 84 HomeBase stores,  of which $15.4 million
was charged in the fourth quarter.

As a result of the March 27, 2001 announcement, the Company expects to recognize
an up front  after tax charge of between  $90  million  and $100  million in the
first quarter of fiscal 2001 primarily for post-closing  occupancy costs and the
depreciation  of fixed  assets  associated  with the 47 stores  that will not be
converted, and severance for a reduction in corporate personnel.

Resources to Execute the Conversion Program

The Company believes it will be able to complete the House2Home conversion using
a number of financial resources including:

     [] A $250 million credit line,  which the Company amended on February 23,
        2001 to provide added  flexibility to support the  conversion  program,
        the  borrowings  on which are not  expected to exceed  $110  million at
        their peak. In addition,  the Company is in the process of completing a
        facility that will provide up to an additional $50 million in financing
        from Back Bay Capital Funding, as part of the expanded credit facility.
        Based on borrowing availability  restrictions under the two facilities,
        the  Company  anticipates  that  it  will  be  able  to  borrow  up  to
        approximately $150 million;

     [] Approximately $180 million, net, from inventory liquidations at the 84
        HomeBase stores;

     [] Cash from sales of owned properties not slated for conversion; and

     [] Existing cash balances.

Capital Requirements Associated with the Conversion Program

The capital requirements associated with the conversion include:

     [] An average of  approximately  $2.5 million per store for  construction
        and fixtures, which are typically spent during the three to four months
        prior to a store grand opening;

     [] Approximately $1 million per store for pre-opening expenses, including
        employee training and grand opening advertising;

     [] Approximately $2 million per store for inventory, net of payables; and

     [] Approximately $4 million for total anticipated severance costs.

At January 27, 2001, the Company had $44.9 million in cash and cash equivalents.
At that date,  there were no borrowings  under the Company's $250 million credit
facility.  Letters  of  credit  outstanding  as of  January  27,  2001 were $4.8
million.

The Company  believes  that its current  resources,  cash flow from  liquidation
sales,  cash flows from  operations  and amounts  available  under its revolving
credit facility and other financing will be sufficient to support its House2Home
conversion program and meet its cash requirements through January 26, 2002.


Restructuring Reserve and Store Closures and Other Charges Reserve

As of January 27,  2001,  $2.1 million of the fiscal 1993  restructuring  charge
remained  accrued on the Company's  consolidated  balance  sheet.  During fiscal
2000, the Company incurred cash  expenditures of $2.2 million  primarily related
to lease  obligations on closed  facilities.  In addition,  the Company reversed
$2.5  million  of  reserves  for a closed  store  for  which a  favorable  lease
settlement  was  reached.  The  ending  balance  consists  primarily  of a lease
obligation on a closed store, which extends through fiscal 2006.

The fiscal 1997 closed store and other charges  reserve had a remaining  accrued
balance of $3.8 million at January 27,  2001.  During  fiscal 2000,  the Company
incurred cash  expenditures of $3.0 million primarily for lease obligations that
included $1.7 million in lease  termination costs related to a previously closed
store. In addition,  $4.4 million of the reserve was reversed for a closed store
reopened  as a  House2Home  store and another  store in which a favorable  lease
termination was  negotiated.  The ending balance  consists  primarily of a lease
obligation on a closed facility, which extends through fiscal 2001.

Recent Accounting Standards

SFAS No.  138,  "Accounting  for  Derivative  Instruments  and  Certain  Hedging
Activities (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.

Risk Factors

If we cannot successfully complete the House2Home conversion program on schedule
and meet other  assumptions as expected,  our operating results could suffer, we
might not make our earnings  projections and these results could have a material
adverse effect on our financial condition.

We are  currently  conducting  a program to close a total of 84 former  HomeBase
stores and reopen a total of 37 of them as House2Home  stores in July 2001.  One
or more of the following factors could keep us from successfully  completing the
program  on  time,  harm  our  operating  results  and  cause us not to make our
earnings projections:

     [] We might not be able to liquidate the inventory of the HomeBase stores
        for the  amounts we  anticipate.
     [] Our construction timing might fall behind schedule.
     [] The costs of remodeling the House2Home stores might be more than we
        expect.
     [] Ongoing positive sales trends in our House2Home stores might not
        continue.
     [] We might not be able to purchase goods from our vendors on the  terms we
        expect.
     [] Our newly expanded distribution center and our systems and controls
        might not operate as efficiently as we have planned.
     [] We may not be able to dispose of real  property and real estate leases a
        soon as we have planned.

The costs of the  conversion  program are  extensive and will harm our financial
position.

The conversion  program involves  extensive  expenditures  which will weaken our
financial  position  and may  make  it more  difficult  for the  Company  to get
additional capital if needed. While the Company currently has in place financial
resources  from  which  to  implement  the  conversion,  in the  event  that the
Company's  results of operations are not as anticipated,  such resources may not
be fully available, resulting in insufficient capital to carry out our plans.

We are entering a different retail industry with House2Home.

While the Company has a number of highly-experienced retail executives, the home
decor and home furnishing businesses of the House2Home concept is different from
the home improvement  business we were in with the HomeBase  stores.  Because of
the Company's  relative  inexperience  with the conditions of this new industry,
our operating results might suffer.

More competition could harm our operating results.

The home  decor and home  furnishings  businesses  are  highly  competitive.  We
compete with a large  number and variety of  retailers,  which have  significant
financial and marketing  resources and many of which will compete  directly with
certain of our product categories.

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.

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

To support our business,  we must hire,  train 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.

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

Our House2Home  stores will be located in three western  states,  with more than
80% 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 energy  crisis in California  and adjoining  states could harm our operating
results.

The energy shortages in California and adjoining states could cause  disruptions
in the  operations  of our stores and could  significantly  increase  our energy
costs, which could harm our operating results.

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;  and Edward J. Weisberger serve as a
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 27, 2001, we had outstanding the principal amount of $90.2 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  change in the  ongoing  positive  trends at the
  company's   House2Home  stores;   House2Home  becoming  a  substantial  growth
  opportunity for the company;  the ultimate  success of the modified  expansion
  program;  the accuracy of all  assumptions  upon which the company's  earnings
  estimates in this document are based;  the company's  ability to  successfully
  complete a conversion program by July of the current fiscal year and return to
  profitability by the third quarter of the current fiscal year; the competitive
  marketplace, economic conditions in the company's markets 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 27,
2001, the Company did not own any marketable securities.


<PAGE>


Item 8. Financial Statements and Supplementary Data



                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES




Report of Independent Accountants.............................................18

Report on Management's Responsibility.........................................18

Consolidated Statements of Operations for the fiscal years ended
January 27, 2001, January 29, 2000 and January 30, 1999.......................19

Consolidated Balance Sheets as of January 27, 2001 and January 29, 2000.......20

Consolidated Statements of Cash Flows for the fiscal years ended
January 27, 2001, January 29, 2000 and January 30, 1999.......................21

Consolidated Statements of Stockholders' Equity for the fiscal years
ended January 27, 2001, January 29, 2000 and January 30, 1999.................22

Notes to Consolidated Financial Statements....................................23


<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  operations,  stockholders'  equity  and cash flows
present fairly, in all material  respects,  the financial  position of HomeBase,
Inc. and  subsidiaries at January 27, 2001 and January 29, 2000, and the results
of their  operations  and their cash flows for each of the three fiscal years in
the period ended  January 27, 2001,  in conformity  with  accounting  principles
generally accepted in the United States of America.  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 of America,  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 our opinion.

PricewaterhouseCoopers LLP

Los Angeles, California
February 26, 2001, except for Note 16, as to which the date is March 27, 2001.


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
accounting  principles  generally  accepted in the United  States of America 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 Audit 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 of
America 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 OPERATIONS
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                               Fiscal Year Ended
---------------------------------------------------------------------------------------------------------------------
                                                                January 27,        January 29,        January 30,
                                                                    2001               2000              1999
---------------------------------------------------------------------------------------------------------------------

  <S>                                                          <C>                <C>                <C>
  Net sales                                                    $   1,439,598      $   1,525,275      $   1,442,341

  Cost of sales, including buying and
    occupancy costs                                                1,235,419          1,196,465          1,124,250
---------------------------------------------------------------------------------------------------------------------
  Gross profit                                                       204,179            328,810            318,091

  Selling, general and administrative
    expenses                                                         312,824            304,457            278,232
  Pre-opening expenses                                                 5,634              3,726                919
  Store closures and other charges                                    (6,450)                 -                  -
---------------------------------------------------------------------------------------------------------------------
  Operating income (loss)                                           (107,829)            20,627             38,940

  Interest on debt and capital leases, net                             4,838              3,440              2,817
---------------------------------------------------------------------------------------------------------------------
  Income (loss) before income taxes and extraordinary gain          (112,667)            17,187             36,123

  Provision (benefit) for income taxes                               (41,687)             6,358             13,760
---------------------------------------------------------------------------------------------------------------------
  Income (loss) before extraordinary gain                            (70,980)            10,829             22,363

  Extraordinary gain on early extinguishment of debt,
  net of income tax of $338 and $1,056, respectively                     576              1,799                  -
---------------------------------------------------------------------------------------------------------------------

  Net income (loss)                                            $     (70,404)     $      12,628      $      22,363
=====================================================================================================================


  Basic net income (loss) per share:
    Income (loss) before extraordinary gain                    $       (1.89)     $        0.28      $        0.59
    Extraordinary gain                                                  0.02               0.05                  -
---------------------------------------------------------------------------------------------------------------------

    Net income (loss)                                          $       (1.87)     $        0.33      $        0.59
=====================================================================================================================

  Diluted net income (loss) per share:
    Income (loss) before extraordinary gain                    $       (1.89)     $        0.28      $        0.54
    Extraordinary gain                                                  0.02               0.05                  -
---------------------------------------------------------------------------------------------------------------------

    Net income (loss)                                          $       (1.87)     $        0.33      $        0.54
=====================================================================================================================


  Shares used in computation of net income per share:

  Basic                                                               37,599             37,849             37,845
  Diluted                                                             37,599             37,936             48,013
</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 27,       January 29,
                                                                                       2001              2000
--------------------------------------------------------------------------------------------------------------------
 ASSETS
   Current assets:
   <S>                                                                            <C>                <C>
     Cash and cash equivalents                                                    $      44,869      $      26,747
     Marketable securities                                                                    -             15,020
     Accounts receivable (net of allowance for doubtful accounts
      of $93 and $39, respectively)                                                      12,449             29,439
     Merchandise inventories                                                            213,352            371,060
     Current deferred income taxes                                                            -              5,676
     Prepaid expenses and other current assets                                            3,047              4,507
     Prepaid and refundable income taxes                                                  9,966                  -
--------------------------------------------------------------------------------------------------------------------
   Total current assets                                                                 283,683            452,449

   Property, net                                                                        246,284            257,726
   Property under capital leases, net                                                     4,320              4,759
   Deferred income taxes                                                                 44,403              6,856
   Other assets                                                                           6,021              5,952
--------------------------------------------------------------------------------------------------------------------

   Total assets                                                                   $     584,711      $     727,742
====================================================================================================================

 LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities:
     Accounts payable                                                             $      38,972      $     108,823
     Restructuring reserve                                                                  440              1,771
     Accrued expenses and other current liabilities                                      84,996             73,195
     Accrued income taxes                                                                     -                635
     Obligations under capital leases due within one year                                   376                327
--------------------------------------------------------------------------------------------------------------------
   Total current liabilities                                                            124,784            184,751

   Long-term debt                                                                        90,182             92,382
   Obligations under capital leases, less portion due within one year                     7,664              8,040
   Noncurrent restructuring reserve                                                       1,699              5,003
   Other noncurrent liabilities                                                          35,744             42,880
--------------------------------------------------------------------------------------------------------------------
   Total liabilities                                                                    260,073            333,056
--------------------------------------------------------------------------------------------------------------------

 Commitments and contingencies (Note 14)

 STOCKHOLDERS' EQUITY
   Preferred stock, par value of $.01 per share; 10,000,000 authorized; none
     outstanding                                                                              -                  -
   Common stock, par value $.01 per share; 190,000,000 shares authorized;
     37,865,798 and 37,874,798 shares issued and outstanding, respectively                  379                379
   Additional paid-in capital                                                           374,688            374,728
   Retained earnings (deficit)                                                          (49,585)            20,819
   Common stock in treasury at cost, 270,400 shares                                        (818)              (818)
   Unearned compensation                                                                    (26)              (348)
   Unrealized holding losses                                                                  -                (74)
--------------------------------------------------------------------------------------------------------------------
   Total stockholders' equity                                                           324,638            394,686
--------------------------------------------------------------------------------------------------------------------

   Total liabilities and stockholders' equity                                     $     584,711      $     727,742
====================================================================================================================
</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 27,       January 29,       January 30,
                                                                 2001               2000             1999
------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                          <C>                <C>               <C>
   Net income (loss)                                         $   (70,404)       $    12,628       $    22,363
   Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
       Depreciation and amortization                              41,780             29,039            27,210
       Inventory write-down                                       55,000                  -                 -
       Extraordinary gain                                           (914)            (2,855)                -
       Loss (gain) on property disposals                           5,085               (669)               14
       Accretion (amortization) of discount on marketable
          securities                                                  82               (210)             (367)
       Income tax benefit of employee stock options                    -                 57               466
       Reversal of restructure reserve and store closures         (6,450)                 -                 -
          and other charges reserve
       Other non-cash items, net                                     282                398               676
       Deferred income taxes                                     (31,871)             7,475             5,930

     Increase (decrease) due to changes in:
       Accounts receivable                                        16,990             (8,680)            4,638
       Merchandise inventories                                   102,708            (31,410)          (25,462)
       Prepaid expenses and other current assets                   1,460             12,537              (604)
       Prepaid and refundable income taxes                        (9,966)                 -                 -
       Other assets                                                  358                792            (1,136)
       Accounts payable                                          (69,851)             5,575             7,126
       Restructuring reserve                                      (2,185)             1,630            (6,564)
       Accrued expenses and other current liabilities             11,840             (2,514)            8,084
       Accrued income taxes                                         (635)               (56)           10,956
       Other non-current liabilities                              (3,136)            (2,239)           (5,266)
------------------------------------------------------------------------------------------------------------------

     Net cash provided by operating activities                    40,173             21,498            48,064

 CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of marketable securities                                 -            (12,728)          (71,088)
     Sale of marketable securities                                15,012              8,586            11,589
     Maturity of marketable securities                                 -             17,164            38,553
     Property additions                                          (34,200)           (28,503)          (36,548)
     Property disposals                                              107                169               303
------------------------------------------------------------------------------------------------------------------

     Net cash used in investing activities                       (19,081)           (15,312)          (57,191)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Borrowing of short-term debt                                 15,000                  -                 -
     Repayment of short-term debt                                (15,000)                 -                 -
     Repayment of long-term debt                                       -             (7,009)              (78)
     Early extinguishment of long-term debt                       (1,271)            (4,609)                -
     Debt issuance costs                                          (1,372)            (2,317)             (226)
     Repayment of capital lease obligations                         (327)              (283)             (254)
     Purchase of treasury stock                                        -               (818)                -
     Proceeds from sale and issuance of common stock                   -                 19               660
------------------------------------------------------------------------------------------------------------------

     Net cash provided by (used in) financing activities          (2,970)           (15,017)              102
------------------------------------------------------------------------------------------------------------------

     Net increase (decrease) in cash and cash equivalents         18,122             (8,831)           (9,025)
     Cash and cash equivalents at beginning of year               26,747             35,578            44,603
------------------------------------------------------------------------------------------------------------------

     Cash and cash equivalents at end of year                $    44,869        $    26,747       $    35,578
==================================================================================================================

SUPPLEMENTAL CASH FLOW INFORMATION:
     Interest paid                                           $     6,929        $     6,433       $     7,260
     Income taxes refunded                                        (3,171)            (2,722)           (4,485)
------------------------------------------------------------------------------------------------------------------
</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 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          -         -         -          699         -          -       -        -           699
     grants
  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          -         -         -          402         -          -       -        -           402
     grants
  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
  Net loss                                  -         -         -           -          -    (70,404)      -        -       (70,404)
  Unrealized holding gains                  -         -         -           -         74          -       -        -            74
  Amortization of restricted stock          -         -         -          297         -          -       -        -           297
     grants
  Cancellation of restricted stock         (9)        -       (40)          25         -          -       -        -           (15)
------------------------------------------------------------------------------------------------------------------------------------

Balance, January 27, 2001              37,866    $  379 $ 374,688    $     (26)  $     -   $(49,585)   (270) $  (818)   $  324,638
====================================================================================================================================
</TABLE>

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


<PAGE>


                                 HOMEBASE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization

During fiscal 2000,  HomeBase(R),  Inc. (the  "Company" or  "HomeBase")  was the
second  largest  operator of home  improvement  warehouse  stores in the western
United States.  At January 27, 2001, the Company  operated 84 HomeBase 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.

During fiscal 2000, the Company  converted  five of its HomeBase  stores to test
the new House2Home(TM) home decorating superstore concept.  In  announcements in
December 2000, and  subsequently  refined in March 2001, the Company  outlined a
program by which it would convert another 37 HomeBase stores into the House2Home
format by the end of July 2001, and close the remaining 47 HomeBase stores.  The
conversion  program is expected to require a cash outlay of  approximately  $5.5
million  per  store  for  hiring,  training,  marketing  and  other  pre-opening
expenses,  for store  remodeling,  and the investment,  net of payables,  in new
inventory.  While there can be no assurance that the new business format will be
successful,  the Company  believes that the conversion to House2Home will return
the Company to  profitability  during  fiscal  2002.  In  addition,  the Company
believes that it has sufficient  financial  resources  available to complete the
conversion process announced. These resources include approximately $180 million
in net cash from the liquidation of inventory at all remaining  HomeBase stores,
borrowings from the credit  facility,  proceeds from the sale of owned locations
not identified for conversion and from cash on hand.


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 27, 2001,
January 29, 2000 and January 30, 1999 are  referred to herein as "fiscal  2000",
"fiscal 1999" and "fiscal 1998", 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.

Revenue Recognition

The Company  recognizes revenue when sales transactions occur and customers take
possession of the merchandise.

Volume Rebates and Other Supplier Credits

The Company  records the credits and payments as a reduction of cost of sales at
the point in time at which the  activities  required by the supplier  related to
the credit or payment are completed,  the amount is fixed and determinable,  and
collectibility  is reasonably  assured.  Arrangements  with suppliers for volume
incentives are typically based on a contractual  arrangement covering a one-year
or less period of time providing for incentives based on purchasing volumes. The
Company is not obligated to purchase a specified volume of the product.

Advertising Costs

Advertising costs, which relate to various media  expenditures,  are expensed as
incurred.  Total  advertising  costs for fiscal  2000,  1999 and 1998 were $23.2
million, $20.8 million and $20.7 million, respectively.  Cooperative advertising
income received from suppliers is recognized as a reduction of advertising costs
in the period in which the related advertising costs occur.

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 operations
is presented net of interest and investment income.

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.

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 of
assets associated with continuing operations is provided using the straight-line
method using the following estimated useful lives.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
  <S>                                       <C>
  Buildings                                 33 years
  Property under capital leases and
          leasehold improvements            Shorter of lease term or useful life
  Furniture, fixtures, and equipment        3-10 years
--------------------------------------------------------------------------------
</TABLE>

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.

Reclassifications

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

New Accounting Standards

SFAS No.  138,  "Accounting  for  Derivative  Instruments  and  Certain  Hedging
Activities (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 27,      January 29,
(In thousands)                                                               2001              2000
-----------------------------------------------------------------------------------------------------------

<S>                                                                       <C>              <C>
Land and buildings                                                        $   159,768      $   157,932
Leasehold improvements                                                         82,062           72,795
Furniture, fixtures and equipment                                             184,808          170,316
-----------------------------------------------------------------------------------------------------------
                                                                              426,638          401,043
Accumulated depreciation                                                     (180,354)        (143,317)
-----------------------------------------------------------------------------------------------------------

Property and equipment, net                                               $   246,284      $   257,726
===========================================================================================================

Property under Capital Leases

Property under capital leases consists of the following components:

-----------------------------------------------------------------------------------------------------------
                                                                          January 27,      January 29,
(In thousands)                                                               2001              2000
-----------------------------------------------------------------------------------------------------------

Property under capital leases                                             $     9,696      $     9,696
Accumulated depreciation                                                       (5,376)          (4,937)
-----------------------------------------------------------------------------------------------------------

Property under capital leases, net                                        $     4,320      $     4,759
===========================================================================================================

Accrued Expenses and Other Current Liabilities

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

-----------------------------------------------------------------------------------------------------------
                                                                          January 27,      January 29,
(In thousands)                                                               2001              2000
-----------------------------------------------------------------------------------------------------------

Self-insurance reserves                                                   $    12,066      $    14,209
Employee compensation                                                          19,065           18,036
Sales and use taxes                                                            16,370           13,696
Rent, utilities, advertising and other                                         37,495           27,254
-----------------------------------------------------------------------------------------------------------

Total  accrued expenses and other current liabilities                     $    84,996      $    73,195
===========================================================================================================
</TABLE>

Note 4 - Net Income Per Share

In accordance with SFAS No. 128, "Earnings Per Share,  "basic earnings per share
is computed  by dividing  net income by the  weighted  average  number of shares
outstanding.  In  computing  diluted  earnings per share,  the weighted  average
number of shares  outstanding is adjusted to additionally  reflect the effect of
potentially dilutive securities.

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

<TABLE>
<CAPTION>
                                                                         Fiscal Year Ended
--------------------------------------------------------- -------------------------------------------------
                                                            January 27,     January 29,      January 30,
(In thousands)                                                 2001             2000            1999
--------------------------------------------------------- ---------------- --------------- ----------------

Numerator:

   Income (loss) from continuing operations
<S>                                                        <C>              <C>             <C>
     before extraordinary gain                             $   (70,980)     $    10,829     $    22,363
   Extraordinary gain, net of income taxes                         576            1,799               -
--------------------------------------------------------- ---------------- --------------- ----------------
   Numerator for basic net income (loss) per share         $   (70,404)     $    12,628     $    22,363

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

   Numerator for diluted net income (loss) per share       $   (70,404)     $    12,628     $    25,937
========================================================= ================ =============== ================
</TABLE>


<TABLE>
<CAPTION>
                                                                         Fiscal Year Ended
--------------------------------------------------------- ---------------- --------------- ----------------
                                                            January 27,     January 29,      January 30,
(In thousands)                                                 2001             2000            1999
--------------------------------------------------------- ---------------- --------------- ----------------

Denominator:

   Denominator for basic net income per share-
<S>                                                             <C>              <C>             <C>
     weighted average shares                                    37,599           37,849          37,845

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 (loss) per share          37,599           37,936          48,013
========================================================= ================ =============== ================
</TABLE>

(1)  In  fiscal  2000 and  fiscal  1999,  the  effect of the  conversion  of the
     convertible  securities  has been excluded from the  computation of diluted
     net income (loss) per share because it was antidilutive.
(2)  In fiscal 2000,  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 (loss) per share.

Note 5 - Debt

At January 27,  2001 and  January 29,  2000,  long-term  debt  consisted  of the
following components:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                          January 27,      January 29,
(In thousands)                                                               2001              2000
-----------------------------------------------------------------------------------------------------------

Convertible subordinated notes, interest at 5.25%, maturing
<S>                                                                       <C>              <C>
     November 1, 2004                                                     $    90,182      $    92,382
-----------------------------------------------------------------------------------------------------------

Total long-term debt                                                      $    90,182      $    92,382
===========================================================================================================
</TABLE>

The following are the aggregate  maturities  of long-term  debt  outstanding  at
January 27, 2001:

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


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

Fiscal years ending January:
<S>                                                                                       <C>
         2002                                                                             $          -
         2003                                                                                        -
         2004                                                                                   90,182
-----------------------------------------------------------------------------------------------------------

Total                                                                                     $     90,182
===========================================================================================================
</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.  The Company repurchased $2.2 million and $7.6 million in face value of
the convertible notes for $1.2 million and $4.6 million, respectively, in fiscal
2000 and 1999,  respectively.  In connection with these  purchases,  the Company
recognized  a $0.6  million  and $1.8  million  extraordinary  gain on the early
extinguishment  of  debt,  net  of  income  taxes,  in  fiscal  2000  and  1999,
respectively.  The repurchase  program is authorized to extend through  December
31, 2001.  However,  the Company's  amended credit  facility  prohibits any such
repurchases through May 2002. Consequently,  the Company will not repurchase any
of its  securities  pursuant  to the current  repurchase  program so long as the
amended credit facility is in place.

On December 3, 1999, the Company  entered into a five-year,  $250 million Credit
Facility (the  "Facility").  The new Credit Facility  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 Facility are
collateralized by eligible inventory and accounts receivable. The Company paid a
one-time  underwriting  fee of $2,125,000  (0.85% of the notional amount) and is
required to pay a fee on the unused portion of the new Credit Facility of 0.375%
annually. Interest on borrowings will be calculated based on the LIBOR rate plus
a 1.5% to 2.0% margin.  The facility is subject to certain  financial  covenants
should excess  availability under the line fall below $40 million and matures on
November 30, 2004.

On February 23, 2001, the Company  amended the Credit  Facility to provide added
flexibility  to  support  the   conversion   program  by  adding  the  Company's
unencumbered owned stores to the collateral base. To complete the amendment, the
Company paid an underwriting fee of $3,750,000 (1.5% of the notional amount) and
borrowings bear interest at prime plus 1.0% or LIBOR plus 3.0%. Depending on the
level of  borrowing  by the  Company,  the fee on the unused  portion of the new
Credit  Facility will range from 0.50% to 0.75%.  The  facility's  maturity date
remained unchanged.

At January 27, 2001, the Company had no borrowings under the new Credit Facility
and had letters of credit outstanding of approximately $4.8 million primarily to
support the purchase of inventories.

Note 6 - 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 27, 2001 were:

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

Fiscal years ending January:
<S>                                                                     <C>                <C>
   2002                                                                 $     1,455        $     71,602
   2003                                                                       1,455              65,113
   2004                                                                       1,508              63,574
   2005                                                                       1,543              60,644
   2006                                                                       1,543              56,373
   Thereafter                                                                 7,173             281,084
--------------------------------------------------------------------------------------- -------------------

   Total minimum lease payments                                              14,677        $    598,390
                                                                                        ===================
   Less amount representing interest                                         (6,637)
---------------------------------------------------------------------------------------

   Present value of net minimum lease payments                          $     8,040
=======================================================================================
</TABLE>

Rental expense under operating  leases amounted to $71.8 million,  $70.8 million
and $66.8  million in fiscal 2000,  1999 and 1998,  respectively.  These amounts
exclude rent of $1.9 million, $3.0 million and $3.8 million in fiscal 2000, 1999
and 1998,  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 $3.2 million under an operating lease.

The table of future minimum lease payments above includes lease  commitments for
a  store  that  was  closed  in  connection  with  the  Company's   fiscal  1993
restructuring.

Note 7 - 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 27,       January 29,      January 30,
(In thousands)                                              2001             2000              1999
-----------------------------------------------------------------------------------------------------------

Income (loss) before income taxes:
<S>                                                     <C>               <C>              <C>
     Operations                                         $  (112,667)      $    17,187      $    36,123
     Extraordinary gain                                         914             2,855                -
-----------------------------------------------------------------------------------------------------------

Total                                                   $  (111,753)      $    20,042      $    36,123
===========================================================================================================


                                                                       Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                                        January 27,       January 29,      January 30,
(In thousands)                                              2001             2000              1999
-----------------------------------------------------------------------------------------------------------

Provision (benefit) for income taxes attributable to
     income (loss) from operations                      $   (41,687)      $     6,358      $    13,760
Provision for income taxes attributable to
     extraordinary gain                                         338             1,056                -
-----------------------------------------------------------------------------------------------------------

Total provision (benefit) for income taxes              $   (41,349)      $     7,414      $    13,760
===========================================================================================================

The following  are the  significant  components  of the provision  (benefit) for
income taxes attributable to operations:

                                                                       Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                                        January 27,       January 29,      January 30,
(In thousands)                                              2001             2000              1999
-----------------------------------------------------------------------------------------------------------

Current:
     Federal                                            $    (9,832)      $      (744)     $     6,183
     State                                                       16              (373)           1,647
-----------------------------------------------------------------------------------------------------------
Total current                                           $    (9,816)      $    (1,117)     $     7,830
-----------------------------------------------------------------------------------------------------------

Deferred:
     Federal                                            $   (29,269)      $     5,776      $     5,652
     State                                                   (2,602)            1,699              278
-----------------------------------------------------------------------------------------------------------
Total deferred                                          $   (31,871)      $     7,475      $     5,930
-----------------------------------------------------------------------------------------------------------

Total provision (benefit) for income taxes attributable
    to income (loss) from operations                    $   (41,687)      $     6,358      $    13,760
===========================================================================================================
</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 27,       January 29,      January 30,
                                                            2001             2000              1999
-----------------------------------------------------------------------------------------------------------

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

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

The following  are the  significant  components  of the  Company's  deferred tax
assets (liabilities) as of January 27, 2001 and January 29, 2000:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                          January 27,      January 29,
(In thousands)                                                               2001              2000
-----------------------------------------------------------------------------------------------------------

Deferred tax assets:
<S>                                                                       <C>              <C>
     Self-insurance reserves                                              $    11,702      $    14,502
     Rental step liabilities                                                    3,281            4,055
     Restructuring and closed store reserves                                    2,328            7,627
     Capital leases                                                             1,460            1,533
     Compensation and benefits                                                  2,178            2,510
     Store conversion reserves                                                 27,477               -
     Net operating loss                                                        11,969               -
     Other                                                                      4,239            4,444
-----------------------------------------------------------------------------------------------------------
Total deferred tax assets                                                 $    64,634      $    34,671
-----------------------------------------------------------------------------------------------------------

Deferred tax liabilities:
     Accelerated depreciation                                             $   (12,579)     $   (13,711)
     Purchase discounts                                                        (3,600)          (3,323)
     Other                                                                     (4,052)          (5,105)
-----------------------------------------------------------------------------------------------------------
Total deferred tax liabilities                                            $   (20,231)     $   (22,139)
-----------------------------------------------------------------------------------------------------------

Net deferred tax assets                                                   $    44,403      $    12,532
===========================================================================================================
</TABLE>

As of January 27, 2001, for income tax purposes,  the Company has operating loss
carryforwards of $16.8  million and $15.2  million, for federal and  alternative
minimum tax purposes, respectively. These operating loss carryforwards expire in
fiscal  2020.  In  addition,  the  Company  has  state tax  operating  losses of
approximately $21.0 million, which expire prior to 2010.

The Company has not established a valuation  allowance  against the net deferred
tax assets at January 27, 2001 and January 29, 2000.  Management  believes it is
more  likely  than not that the  results  of  future  operations  will  generate
sufficient taxable income to realize the net deferred tax assets.

Note 8 - Investments in Marketable Securities

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

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

<S>                                                     <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
===========================================================================================================

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

                                                                       Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                                        January 27,       January 29,      January 30,
(In thousands)                                              2001             2000              1999
-----------------------------------------------------------------------------------------------------------

Sales proceeds                                          $     15,012      $     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.

Note 9 - 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 27, 2001                  January 29, 2000
-----------------------------------------------------------------------------------------------------------
                                         Carrying                          Carrying
(In thousands)                            Amount         Fair Value         Amount          Fair Value
-----------------------------------------------------------------------------------------------------------

<S>                                     <C>             <C>               <C>              <C>
Cash and cash equivalents               $     44,869    $    44,869       $     26,747     $    26,747
Marketable securities                              -              -             15,020          15,020
Convertible subordinated debt                (90,182)       (42,419)           (92,382)        (55,429)
-----------------------------------------------------------------------------------------------------------
</TABLE>

Note 10 - Stock Options and Stock Purchase Plans

Stock Option 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 27,  2001,  1,322,824  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.

At  January  27,  2001,  the 1997  Stock  Incentive  Plan  was the  only  active
stock-based employee compensation plan.

The  Company  applies  Accounting  Principles  Board  ("APB")  Opinion  No.  25,
"Accounting  for Stock Issued to Employees",  in accounting for its  stock-based
compensation.  Total pre-tax compensation cost charged to income for stock-based
employee  compensation  awards in fiscal 2000,  1999 and 1998 was $0.3  million,
$0.5  million  and  $0.7  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  (loss) and net income  (loss) 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 27,       January 29,      January 30,
                                                            2001             2000              1999
-----------------------------------------------------------------------------------------------------------

<S>                                                         <C>               <C>              <C>
Risk-free interest rate                                     5.03%             6.63%            4.62%
Expected volatility                                         67.3%             41.1%            37.0%
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 27,       January 29,      January 30,
(In thousands, except per share amounts)                    2001             2000              1999
-----------------------------------------------------------------------------------------------------------

<S>                                                     <C>               <C>              <C>
Pro forma income (loss) from operations before
extraordinary gain                                      $   (74,509)      $     8,589      $    20,617

Extraordinary gain on early extinguishment of debt              576             1,799                -
-----------------------------------------------------------------------------------------------------------

Pro forma net income (loss)                             $   (73,933)      $    10,388      $    20,617
===========================================================================================================

Pro forma income (loss) per share--Income (loss)
     from operations before extraordinary gain
        Basic                                           $     (1.98)      $      0.23      $      0.54
        Diluted                                         $     (1.98)      $      0.23      $      0.43

Pro forma income (loss) per share--Net income (loss):
        Basic                                           $     (1.97)      $      0.27      $      0.54
        Diluted                                         $     (1.97)      $      0.27      $      0.43
-----------------------------------------------------------------------------------------------------------
</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  (loss) 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 30, 1999:

<S>                                                                         <C>            <C>
Outstanding at beginning of year                                            3,108,065      $     5.30
          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
-----------------------------------------------------------------------------------------------------------

Fiscal Year Ended January 27, 2001:
          Granted                                                           2,136,850      $     2.31
          Forfeited                                                        (1,232,325)           5.22
-----------------------------------------------------------------------------------------------------------

Outstanding at January 27, 2001                                             4,280,670      $     3.59
===========================================================================================================


-----------------------------------------------------------------------------------------------------------
                                                                           Number Of     Weighted-Average
                                                                            Options       Exercise Price
-----------------------------------------------------------------------------------------------------------
Exercisable at:
          January 30, 1999                                                  1,594,476            4.42
          January 29, 2000                                                  2,282,277            4.96
          January 27, 2001                                                  1,783,064            4.85
-----------------------------------------------------------------------------------------------------------

Weighted-average fair value of options granted during the year:
          Fiscal 1998                                                                            5.48
          Fiscal 1999                                                                            4.99
          Fiscal 2000                                                                            3.59
-----------------------------------------------------------------------------------------------------------
</TABLE>

The following is additional  information related to stock options outstanding at
January 27, 2001:

<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>
   $ 0.00   to  $ 1.99           65,000   $     1.75          8.1                   -      $        -
     2.00   to    3.23        2,380,338         2.40          6.0             347,488            2.83
     3.24   to    4.64        1,099,021         4.16          4.9             786,524            4.15
     4.65   to    6.45          479,536         5.98          5.8             418,569            5.98
     6.46   to    9.00          256,775         8.17          6.8             230,483            8.22
----------------------------------------------------------------------- -----------------------------------

   $ 0.00   to  $ 9.00        4,280,670   $     3.59          5.8           1,783,064      $     4.85
======================================================================= ===================================
</TABLE>

As of January  27,  2001,  January  29,  2000 and  January  30,  1999,  687,654,
2,273,454,  and 2,401,731 shares,  respectively,  were reserved for future stock
awards under the Company's stock option plans.

Stockholder Rights Plan

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 have 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.

Note 11 - Pensions and Other Post-Retirement Benefits

Retirement Plan

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.

Post-Retirement Plan

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
                                                                                    Medical Plan
                                                                           --------------------------------
                                                                                  Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                                                             January 27,    January 29,
(In thousands)                                                                  2001            2000
-----------------------------------------------------------------------------------------------------------

Change in Benefit Obligation:
<S>                                                                           <C>            <C>
     Benefit obligation at beginning of year                                  $      517     $      767
     Service cost                                                                     84             90
     Interest cost                                                                    40             30
     Plan participants' contributions                                                  3              -
     Actuarial (gain) loss                                                            41           (370)
-----------------------------------------------------------------------------------------------------------

     Benefit obligation at end of year                                        $      685     $      517
===========================================================================================================

Change in Plan Assets:
     Fair value of assets at beginning of year                                $        -     $        -
     Employer contribution                                                            (3)             -
     Plan participants' contributions                                                  3              -
-----------------------------------------------------------------------------------------------------------

     Fair value of plan assets at end of year                                 $        -     $        -
===========================================================================================================


     Unfunded benefit obligation                                                     685            517
     Unrecognized net actuarial gain                                                 297            370
-----------------------------------------------------------------------------------------------------------

Accrued benefit cost                                                          $      982     $      887
===========================================================================================================


Weighted-average assumptions:

     Discount rate                                                                  7.00%          7.75%
===========================================================================================================
</TABLE>

Net post-retirement medical benefit costs include the following components:
<TABLE>
<CAPTION>
                                                                                   Post-Retirement
                                                                                     Medical Plan
                                                                         ----------------------------------
                                                                                  Fiscal Year Ended
-----------------------------------------------------------------------------------------------------------
                                                                             January 27,    January 29,
(In thousands)                                                                   2001           2000
-----------------------------------------------------------------------------------------------------------

Components of net periodic benefit cost:
<S>                                                                            <C>           <C>
     Service cost                                                              $     84      $     90
     Interest cost                                                                   40            30
     Recognized net actuarial gain                                                  (29)          (25)
-----------------------------------------------------------------------------------------------------------

     Net periodic benefit cost                                                 $     95      $     95
===========================================================================================================
</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
-----------------------------------------------------------------------------------------------------------

Effect on total of service and interest
<S>                                                     <C>                             <C>
    cost components                                     $  15                           $ (13)
Effect on post-retirement medical benefit
    obligation                                          $  80                           $ (71)

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

Defined Contribution Plans

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 2000, 1999 and 1998, 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 $0.6 million,  $0.5
million and $0.5 million in fiscal years 2000, 1999 and 1998, respectively.

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 $2.3 million,  $2.2 million
and $1.8 million in fiscal years 2000, 1999 and 1998, respectively.

Note 12 - 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>
As of January 29, 2000                                                $    6,774         $    11,171

Cash expenditures incurred during the year                                (2,185) (1)         (2,971) (2)

Reversal of Reserves and other charges                                    (2,450) (3)         (4,405) (4)
------------------------------------------------------------------- ------------------ -------------------

As of January 27, 2001                                                $    2,139  (5)    $     3,795  (6)
=================================================================== ================== ===================
</TABLE>

(1)  Cash expenditures  during the year consisted primarily of lease obligations
     on closed facilities and other related operating costs and $1.4 million for
     a lease settlement related to a previously closed store.
(2)  Cash   expenditures   during  the  year  included  $1.7  million  in  lease
     termination  costs  related to a  previously  closed store as well as lease
     obligations on closed facilities.
(3)  Includes a $2.5 million  reversal of reserves for a closed store for which
     a lease settlement was reached.
(4)  Includes $4.0 million in reversal of reserves for a closed store reopened
     as a House2Home store and another store for which a favorable lease
     termination was negotiated.
(5)  The ending balance consists primarily of lease obligations on closed
     facilities, which extend through 2006.
(6)  The ending balance consists primarily of lease obligations on closed
     facilities, which extend through 2002.

Note 13 - Store Liquidation Charge

In the fourth quarter of fiscal 2000, the Company recorded a $55 million pre-tax
charge for the liquidation of inventory at all remaining 84 HomeBase stores. The
Company  also  accelerated  the  depreciation  of fixed  assets,  of which $15.4
million was charged in the fourth quarter.

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 27, 2001:                                  Quarter Ended
--------------------------------------------- --------------- -------------- -------------- ---------------
                                                April 29,       July 29,      October 28,    January 27,
(In thousands, except per share data)              2000           2000           2000            2001
--------------------------------------------- --------------- -------------- -------------- ---------------

<S>                                           <C>              <C>           <C>             <C>
  Net sales                                   $   365,767      $   407,068   $   334,350     $   332,413
  Gross profit                                     73,709           81,134        64,919         (15,223)
  Operating income (loss)                          (1,538)           2,293       (15,352)        (94,057)
  Income (loss) before extraordinary gain          (1,683)           1,447       (10,319)        (60,425)
  Net income (loss)                                (1,107)           1,447       (10,319)        (60,425)

  Basic net income (loss) per share:
   Income (loss) before extraordinary gain    $     (0.05)     $      0.04   $     (0.27)   $     (1.61)
   Extraordinary gain                                0.02               -             -
   Net income (loss)                          $     (0.03)     $      0.04   $     (0.27)   $     (1.61)

  Diluted net income (loss) per share:
   Income (loss) before extraordinary gain    $     (0.05)     $      0.04   $     (0.27)   $     (1.61)
   Extraordinary gain                                0.02               -             -              -
   Net income (loss)                          $     (0.03)     $      0.04   $     (0.27)   $     (1.61)
--------------------------------------------- --------------- -------------- -------------- ---------------


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

  Net sales                                   $   365,293      $   453,667   $   379,167     $   327,148
  Gross profit                                     78,297          100,603        82,931          66,979
  Operating income (loss)                           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 (loss) per share:
   Income (loss) before extraordinary gain    $      0.02      $      0.27   $      0.10    $     (0.10)
   Extraordinary gain                                  -                -             -            0.05
   Net income (loss)                          $      0.02      $      0.27   $      0.10    $     (0.05)

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

In fiscal 2000 and 1999,  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.

Note 16 - Subsequent Events

On March 26, 2001,  the Company  entered into a commitment  letter  agreement to
obtain up to an additional $50 million in term loan financing.  The financing is
documented as an amendment and  restatement  of the amended $250 million  Credit
Facility.  The term loan is collateralized by the Company's eligible  inventory,
receivables  and owned stores and is due on November  30, 2004.  Interest on the
term loan is payable monthly at a rate between 13.00% and 16.25% per annum.  The
Company is required to pay an anniversary  fee of 3.0% and 2.5%,  payable on the
first and second  anniversary dates of the closing,  respectively,  based on the
outstanding  borrowings on the term loan at each anniversary  date. In addition,
the Company paid a  non-refundable  commitment  fee of  $1,750,000  (3.5% of the
notional amount) to execute the commitment letter.

On March  27,  2001,  the  Company  communicated  through  a press  release  and
conference call that it was reducing the previously announced number of HomeBase
stores to be converted  into the House2Home  format,  from  approximately  67 to
approximately  42. In doing so,  the  Company  also made  known that it will not
reopen,  at a future date,  the  remaining  47 HomeBase  stores and instead will
market the owned and leased properties for sale or sublease.  Therefore, as part
of the  announcement  on March 27, 2001, the Company  projected an expected loss
for the first  quarter of fiscal 2001 to be in the range of $3.50 to $3.75,  per
diluted  share,  which  reflects a charge of $90 to $100 million,  net of taxes.
This charge is composed of the  projected  net lease  liability on leased stores
and  equipment,  the  write-down of impaired  assets at the closing stores and a
smaller  component for severance costs associated with team members notified and
released immediately following the announcement.



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 27, 2001 (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 17. 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).
3.3            Amended and Restated By-laws  (incorporated  herein by reference
               to the Registrant's  Form 10-Q (File No. 1-10259), dated July 29,
               2000).
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).
10.16 *        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          Loan and Security Agreement dated December 3, 1999  (incorporated
               herein by reference to the Registrant's Form 10-K (File No.
               1-10259), dated January 29, 2000).
10.35 *        Replacement Equity Unit Agreement, dated December 9, 1999, with
               John  L.  Price   (incorporated   herein  by   reference  to  the
               Registrant's  Form 10-K (File No.  1-10259),  dated  January  29,
               2000).
10.36 *        Agreement  and  Release of All Claims  with Allan P.  Sherman,
               dated  March 2, 2000  (incorporated  herein by  reference  to the
               Registrant's  Form 10-K (File No.  1-10259),  dated  January  29,
               2000).
10.37 *        Amendment to Employment  Agreement,  dated March 2, 2000,  with
               Herbert  J.  Zarkin  (incorporated  herein  by  reference  to the
               Registrant's  Form 10-K (File No.  1-10259),  dated  January  29,
               2000).
10.38 *        Change of Control  Agreement,  dated as of May 31,  2000,  with
               Herbert  J.  Zarkin  (incorporated  herein  by  reference  to the
               Registrant's Form 10-Q (File No. 1-10259), dated April 29, 2000).
10.39 *        Form of  Indemnification  Agreement,  dated as of May 31, 2000,
               with  directors and executive  officers  (incorporated  herein by
               reference to the Registrant's Form 10-Q (File No.
               1-10259), dated April 29, 2000).
10.40 #        2001 Loan and Security Agreement, dated February 23, 2001


21.0 #         Subsidiaries of the Company.
23.0 #         Consent of Independent Accountants.


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




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

               None


<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 23, 2001                            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,              April 23, 2001
--------------------------    President, Chief Executive
    Herbert J. Zarkin         Officer of the Company and Director
                              (Principal Executive Officer)


/s/ WILLIAM B. LANGSDORF      Executive Vice President,           April 23, 2001
--------------------------    Chief Financial Officer
    William B. Langsdorf      (Principal Financial Officer and
                              Principal Accounting Officer)


/s/ JOHN D. BARR              Director                            April 23, 2001
--------------------------
    John D. Barr

/s/ ROBERT W. COX             Director                            April 23, 2001
--------------------------
    Robert W. Cox

/s/ HAROLD LEPPO              Director                            April 23, 2001
--------------------------
    Harold Leppo

/s/ ERNEST T. KLINGER         Director                            April 23, 2001
--------------------------
    Ernest T. Klinger

/s/ LORNE R. WAXLAX           Director                            April 23, 2001
--------------------------
    Lorne R. Waxlax

/s/ EDWARD J. WEISBERGER      Director                            April 23, 2001
--------------------------
    Edward J. Weisberger
</TABLE>