SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549

                 ______________________________

                           FORM 10-K
                 ______________________________


[X]  ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
     THE  SECURITIES  EXCHANGE ACT OF  1934:   For  the
     fiscal year ended April 29, 2000

                          OR

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

             Commission File No. 000-24385

                SCHOOL SPECIALTY, INC.
(Exact name of Registrant as specified in its charter)

            Delaware                        39-0971239
(State or other jurisdiction of          (I.R.S. Employer
 incorporation or organization)        Identification No.)

   1000 North Bluemound Drive
      Appleton, Wisconsin                     54914
(Address of principal executive offices)    (Zip Code)

Registrant's  telephone number,  including area code:  (920) 734-5712

Securities registered pursuant to Section 12(b) of the Act:  None

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

             Common Stock, $.001 par value
                   (Title of class)


     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 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.  [   ]

     The  aggregate  market value of the  voting  stock
held by nonaffiliates of the Registrant, as of July  1,
2000,  was approximately $314,659,898. As of such date,
there  were  17,464,505 of the Registrant's  shares  of
common stock outstanding.

          DOCUMENTS INCORPORATED BY REFERENCE

     Part  III  is incorporated by reference  from  the
Proxy  Statement for the Annual Meeting of Stockholders
to be held on August 29, 2000.

<PAGE>

                        PART I

Item 1.  Business

     Unless the context requires otherwise, all
references to "School Specialty," "we" or "our" refer
to School Specialty, Inc. and its subsidiaries.  Our
fiscal year ends on the last Saturday in April in each
year.  In this Annual Report on Form 10-K ("Annual
Report"), we refer to fiscal years by reference to the
calendar year in which they end (e.g. the fiscal year
ended April 29, 2000 is referred to as "fiscal 2000").
Note that fiscal 2000 had 53 weeks, while all other
fiscal years reported and referenced represent 52
weeks.



                       Overview

     School Specialty is the largest marketer of non-
textbook educational supplies and furniture to schools
for pre-kindergarten through twelfth grade.  We offer
more than 72,000 items through an innovative two-
pronged marketing approach that targets both school
administrators and individual teachers.  Our broad
product range enables us to provide our customers with
one source for virtually all of their non-textbook
school supplies and furniture needs.

     We have grown significantly in recent years
through internal growth and acquisitions.  For the
fiscal year ended April 29, 2000, our revenues were
$639.3 million and our operating income was $48.6
million, a 38% increase over fiscal 1999.

     Our "top down" marketing approach targets school
administrators at the state, regional and local levels
using our network of over 300 sales representatives and
our School Specialty general supply and furniture
catalogs.  Our "bottom up" approach seeks to reach
individual teachers and curriculum specialists
primarily through the mailing of our
ClassroomDirect.com general supply catalog and our
seven different specialty catalogs.  In January 2000,
we mailed over 13 million catalogs to more than three
million teachers and curriculum specialists.

     We also use the Internet to market and sell our
products, building on the proven two-pronged marketing
approach.  "ClassroomDirect.com"  is a fully integrated
e-commerce website targeted to teachers and offering
over 13,000 items for sale.  "JuneBox.com"  offers one-
stop shopping for all of School Specialty's products
on-line and also provides a community forum and content
aimed at educators. In the summer of 2000, JuneBox.com
will be open to unrelated vendors creating a purchasing
portal for schools.

     School Specialty was incorporated as a wholly
owned subsidiary by U.S. Office Products in Delaware in
February 1998 to hold its Educational Supplies and
Products Division.  The predecessor to this business
was incorporated in 1959 and acquired by U.S. Office
Products in 1996.  In June, 1998, U.S. Office Products
distributed to its shareholders all of the Common Stock
of School Specialty in a "spin-off" transaction.  At
the same time as this spin-off, School Specialty sold
2,375,000 shares of Common Stock in an initial public
offering and a concurrent offering to several of its
officers and directors.  On April 16, 1999, School
Specialty sold 2,400,000 shares of Common Stock in a
secondary public offering, and sold an additional
151,410 shares on May 17, 1999 to cover over-
allotments.  Our Common Stock is listed on the Nasdaq
National Market under the symbol "SCHS."  Our principal
offices are located at 1000 North Bluemound Drive,
Appleton, Wisconsin 54914, and our telephone number is
(920) 734-2756.  Our world wide general website address
is www.schoolspecialty.com.  Information contained in
any of our websites is not deemed to be a part of this
Annual Report.

<PAGE>

                   Industry Overview

     The school supply market consists of the sale of
non-textbook school supplies, furniture and equipment
to school districts, individual schools, teachers and
curriculum specialists who purchase products for school
and classroom use.  The National School Supply
Equipment Association estimates that annual sales of
non-textbook educational supplies and equipment to the
school supply market are approximately $6.1 billion.
Of this amount, over $3.6 billion is sold through
institutional channels and the remaining $2.5 billion
is sold through retail channels.

     According to the U.S. Department of Education,
there are approximately 16,000 school districts,
110,000 public and private elementary and secondary
schools and 3.1 million teachers in the United States.
School supply procurement decisions are made at the
school district level by administrators and curriculum
specialists, at the school building level by principals
and at the classroom level by teachers.  Some school
supplies are purchased directly from manufacturers
while others are purchased through marketing firms such
as us.  We estimate that there are over 3,400 marketers
of non-textbook school supplies and equipment, the
majority of which are family or employee owned
businesses that operate in a single geographic region
and have annual revenues under $20 million.  We believe
that the increasing demand for single source suppliers,
prompt order fulfillment and competitive prices, and
the related need for suppliers to invest in automated
inventory and electronic ordering systems, is
accelerating the trend toward consolidation in our
industry.

     The demand for school supplies is driven primarily
by the level of the student population and, to a lesser
extent, expenditures per student.  Student population
is a function of demographics, while expenditures per
student are also affected by government budgets and the
prevailing political and social attitudes towards
education.  According to U.S. Department of Education
estimates, student enrollment in kindergarten through
twelfth grade public and private schools began growing
in 1986, reaching a record level of nearly 53 million
students in 1998.  Current projections by the U.S.
Department of Education indicate that student
enrollment will continue to grow to nearly 55 million
within three years.  The U.S. Department of Education
also projects that expenditures per student in public
elementary and secondary schools will continue to rise.
Expenditures of $272 billion in 1997 are projected to
increase to $341 billion by the year 2001.  These
projected increases in expenditures include a projected
increase in total per student spending from $5,961 per
student in 1997 to $7,179 by the year 2001.  We believe
that the current political and social environment is
favorable for education spending.

                  Recent Acquisitions

     Audio Graphic Systems. In May, 1999, we acquired
Audio Graphic Systems (Audio Graphics).  Audio Graphics
is a business that specializes in the sale of audio-
visual equipment to schools.  We paid $2.4 million for
Audio Graphics, of which $1.2 million was paid in cash
and $1.2 million in shares of Common Stock (an
aggregate of 57,151shares were issued). The cash
portion of the purchase price was financed through
borrowings under our credit facility.  During calendar
1999, Audio Graphics had revenues of approximately $13
million.

                  Internet Initiative

     Because more schools and teachers are connecting
to the Internet, we have aggressively pursued sales
opportunities through this rapidly growing channel.  By
establishing an early presence on the Internet, we
believe we have gained a significant competitive
advantage and valuable brand recognition.  Our goal is
to become the leading marketer of school supplies and
furniture over the Internet.  This may also permit us
to expand our customer base over time to include
individuals and other non-traditional customers.

<PAGE>

     In January 1999, we launched the first phase of
our Internet initiative with the opening of our fully
integrated e-commerce website ClassroomDirect.com.  The
site offers access to over 13,000 stock keeping units
with digital pictures of most items.  Although
currently teacher focused, the site could be adapted to
a more consumer based format.  In February 2000, we
signed an agreement with America Online, Inc. (AOL) for
placement in the Shop@AOL on-line shopping destination
with the goal to increase visibility with both teachers
and consumers. The increasing demand by school
administrators and teachers for more information in
making supply decisions, the lack of a wide variety of
educational products in stores and the growing
importance of convenience make the Internet a viable,
low cost channel for the marketing of education
supplies.

     The second phase of our Internet initiative,
launched in August 1999, JuneBox.com, offers an
education portal on the Internet.  This portal is
structured as an education mall offering our products
for sale and also provides a community forum and
content aimed at educators.  We believe that by
providing education related content and information,
this portal will place us at the education community's
decision point for supply and content which will
strengthen our brands.  In March 2000 we signed an
agreement with Ariba, Inc., one of the world's leading
providers of business-to-business e-commerce solutions,
to power JuneBox.com and facilitate the e-commerce
marketplace for the procurement of school materials.
This site will eventually be expanded to include
additional vendors offering one-stop on-line shopping
for all products purchased by schools and will also
provide a community forum educators can visit to find
teaching tips, lesson plan help, product reviews and
updates on current events affecting the education
market.

                       Strengths

     We attribute our strong competitive position to
the following key attributes:

     Leading Market Position.  We have developed our
leading market position by emphasizing high quality
products, superior order fulfillment and exceptional
customer service.  We believe that our large size and
brand recognition have resulted in significant buying
power, economies of scale and customer loyalty.

     Broad Product Line.  Our strategy is to provide a
full range of high quality products to meet the
complete supply needs of schools for pre-kindergarten
through twelfth grade.  With over 72,000 stock keeping
units ranging from classroom supplies and furniture to
playground equipment, we provide customers with one
source for virtually all of their non-textbook school
supply and furniture needs.  Our specialty brands
enrich our general product offering and create
opportunities to cross merchandise our specialty
products to our traditional customers.  Specialty
brands include the following:

          Brand                          Products
          -----                          --------
          Childcraft                     Early childhood
          Sax Arts and Crafts            Art supplies
          Frey Scientific                Science
          Sportime                       Physical education
          Brodhead Garrett               Industrial arts
          Gresswell                      Library
          Hammond & Stephens             School forms
          SmartStuff                     Software

     Innovative Two-Pronged Marketing Approach.  School
supply procurement decisions are made at the district
and school levels by administrators, and at the
classroom level by curriculum specialists and teachers.
We market to both of these groups, addressing
administrative decision makers with a "top

<PAGE>

down" approach through our 300 person sales force and the
School Specialty general supply and furniture catalogs,
and targeting teachers and curriculum specialists with
a "bottom up" approach primarily through the mailing of
ClassroomDirect.com general supply catalogs and our
seven different specialty catalogs to over three
million teachers each year.  We utilize our customer
database across our family of catalogs to maximize
their effectiveness and increase our marketing reach.

     Internet Offering.  Our primary e-commerce sites,
JuneBox.com for administrative purchase decisions and
ClassroomDirect.com for teacher-based decisions,
establish an early yet comprehensive presence on the
Internet which, we believe, will be a significant
competitive advantage.

     Stable Industry.  Because the market for
educational supplies is driven primarily by
demographics and government spending, we believe that
our industry is less exposed to economic cycles than
many others.

     Ability to Complete and Integrate Acquisitions.
We have successfully completed over 20 acquisitions of
companies since May 1996.  We have established a
12-month integration process in which a transition team
is assigned to:

       *    sell or discontinue incompatible business units,

       *    reduce the number of stock keeping units,

       *    eliminate redundant expenses,

       *    integrate the acquired entity's management
          information systems, and

       *    exploit buying power.

     To date, our integration efforts have focused on
acquired traditional companies and certain
administrative and warehousing functions at our
specialty divisions.  We believe that through these
processes, we can rapidly improve the operating margins
of the businesses we acquire.

     Use of Technology.  We believe that our use of
information technology systems allows us to turn
inventory more quickly than our competitors, offer
customers more convenient and cost effective ways of
ordering products and more precisely focus our sales
and marketing campaigns.

     Experienced and Incentivised Management.  Our
management team provides depth and continuity of
experience.  In addition, management's interests are
aligned with those of our stockholders, as many members
of management own shares of our Common Stock and/or
have been granted options to purchase such Common
Stock.

                    Growth Strategy

     We use the following strategies to grow and
enhance our position as the leading marketer of non-
textbook educational supplies and furniture:

     Increase Revenues of Specialty and Proprietary
Products.  We believe we can increase our margins by
selling more specialty products and products for which
we are the only supplier.  Specialty products accounted
for approximately 40% of our revenues in fiscal 2000,
compared to approximately 35% in fiscal 1999.

     Expand Existing Traditional Business.  We believe
that we can also increase the revenues of our
traditional business by adding sales representatives in
geographic markets in which we are

<PAGE>

underrepresented and
by cross merchandising our specialty products to our
traditional customers. During the September to December
1999 recruiting season, we added approximately 25 sales
representatives to select geographic locations to
improve market penetration.

     Leverage the Internet Channel.  Because more
schools and teachers are connecting to the Internet, we
are aggressively pursuing sales opportunities through
this rapidly growing channel.  By establishing an early
presence on the Internet, we believe we can gain a
significant competitive advantage and valuable brand
recognition.  Our goal is to become the leading
marketer of school supplies and furniture over the
Internet.  This may also permit us to expand our
customer base over time to include individuals and
other non-traditional customers.  We believe this
strategy can be effective both as an offensive tool,
enhancing revenue at a low incremental cost, and as a
defensive one, by preventing other existing and
prospective Internet competitors from establishing
themselves in this market.  The establishment of early
brand recognition will facilitate the establishment of
our educational portal as the key education related
website.

     Pursue Acquisitions.  We believe that there are
many attractive acquisition opportunities in our highly
fragmented industry.  As a public company, we have
greater access to capital for acquisitions than many of
our competitors.  We will continue to pursue
opportunities that complement our specialty product
offerings.

     Improve Profitability.  We improved our operating
margin (as measured by our operating income before non-
recurring acquisition and restructuring costs divided
by our revenues) from 3.2% in 1995 to 7.6% in fiscal
2000.  We believe that we can further improve our
operating margins in the traditional and specialty
segments by eliminating redundant expenses of acquired
businesses, leveraging our overhead costs, increasing
our purchasing power and improving the efficiency of
our warehousing and distribution.

                     Product Lines

     We market two broad categories of products:
general school supplies and specialty products geared
towards specific educational disciplines.  Our general
school supply products are offered to school
administrators by our sales force through our School
Specialty catalog and to teachers and curriculum
specialists through direct mailings of our
ClassroomDirect.com catalog.  Our specialty products
are offered to teachers and curriculum specialists
through direct mailings of our seven specialty
catalogs.  Our specialty products enrich our general
supply product offering and create opportunities to
cross merchandise our specialty products to our
traditional customers.  With over 72,000 stock keeping
units ranging from classroom supplies and furniture to
playground equipment, we provide customers with one
source for virtually all of their non-textbook school
supply and furniture needs.

     Our general school supply product lines can be
described as follows:

     School Specialty.  Through the School Specialty
catalog, which is targeted to administrative decision
makers, we offer a comprehensive selection of classroom
supplies, instructional materials, educational games,
art supplies, school forms (such as reports, planners
and academic calendars), educational software, physical
education equipment, audio-visual equipment, school
furniture and indoor and outdoor equipment.  We believe
we are the largest school furniture resale source in
the United States.  We have been granted exclusive
franchises for certain furniture lines in specific
territories and we enjoy significant purchasing power
in open furniture lines. We enhance our furniture
offering with a custom design and contract management
service called Projects by Design.  Projects by Design
is a rapidly growing segment of our traditional
business.

<PAGE>

     ClassroomDirect.com.  ClassroomDirect.com offers
its customers substantially the same products as those
offered through the School Specialty catalog but
focuses on reaching teachers and curriculum specialists
directly through its mail-order catalogs and fully
integrated Internet e-commerce website.  The Internet
site targets the traditional catalog market and other
consumers interested in educational products, such as
home school families, churches and parents.

     Our specialty brands offer product lines for
specific educational disciplines, as follows:

     Childcraft.  Childcraft markets early childhood
education products and materials.  Childcraft also
markets over 1,000 proprietary or exclusive products
manufactured by its Bird-in-Hand Woodworks subsidiary,
including wood classroom furniture and equipment such
as library shelving, cubbies, easels, desks and play
vehicles.

     Sax Arts and Crafts.  Sax Arts and Crafts is a
leading marketer of art supplies and art instruction
materials, including paints, brushes, paper, ceramics,
art metals and glass, leather and wood crafts.  Sax
Arts and Crafts offers customers a toll free "Art Savvy
Hotline" staffed with professional artists to respond
to customer questions.

     Frey Scientific.  Frey Scientific is a leading
marketer of laboratory supplies, equipment and
furniture for science classrooms.  Frey Scientific
offers value added focus in the biology, chemistry,
physics and earth science areas.

     Sportime.  Sportime is a leading marketer of
physical education, athletic and recreational products.
Sportime's catalog product offering includes catalogs
from early childhood through middle school as well as
targeted products for physically challenged children.

     Brodhead Garrett.  Brodhead Garrett is the
nation's oldest marketer of industrial arts/technical
materials to classrooms.  Brodhead Garrett's product
line includes such various items as drill presses, sand
paper, lathes and robotic controlled arms.

     Gresswell.  Gresswell markets library-related
products in the U.K., including furniture, and media
display and storage.  Gresswell's dedicated sales and
design team helps customers plan, design and install
library projects using computer assisted design
equipment.

     Hammond & Stephens.  Hammond & Stephens is a
leading publisher of school forms, including student
assignment books, record books, grade books, teacher
planners and other printed forms for kindergarten
through twelfth grade.

     SmartStuff.  SmartStuff is the developer of
FoolProofr Internet, a comprehensive Internet security
and web management solution for schools and FoolProofr
security software, a desktop software security program
which limits access by children to selected programs
and applications on desktop computers.

     Our merchandising managers, many of whom have
prior experience in education, continually review and
update the product lines for each operating division.
The merchandising managers convene customer focus
groups and advisory panels to determine whether current
offerings are well-received and to anticipate future
demand.  The merchandising managers also travel to
product fairs and conventions seeking out new product
lines.  This annual review process results in an
organic reshaping and expansion of the educational
materials we offer.

<PAGE>

                  Sales and Marketing

     Our Two-Pronged Approach.  We believe we have
developed a substantially different sales and marketing
model from that of traditional school supply and school
furnishings marketing companies in the United States.
Our strategy is to use two separate marketing
approaches ("top down" and "bottom up") to reach all
the prospective purchasers in the school system.

     Traditional Business.  Our national marketing
model has over 300 sales representatives operating
within 17 regions supported by regional managers and
two regional customer service and sales support call
centers.  We believe our national structure provides
for effective sales management, resulting in higher
regional penetration, and achieves significant cost
savings through focused distribution and call centers.

     We have a broad customer base and no single
customer accounted for more than 2% of sales during
fiscal 2000, 1999 and 1998.  Schools typically purchase
school supplies and furniture based on an established
relationship with relatively few suppliers.  We
establish and maintain our relationship with our
traditional customers by assigning accounts within a
specific geographic territory to a local area sales
representative who is supported by a centrally located
customer service team.  Our customer service
representatives call on existing traditional customers
frequently to ascertain and fulfill their school supply
needs.  The representatives maintain contact with these
customers throughout the order cycle and assist in
processing orders.

     Our primary compensation program for sales
representatives is based on commissions as a percentage
of gross profit on sales.  For new and transitioning
sales representatives, we offer salary and expense
reimbursement until the representative is moved to a
full commission compensation structure.

     Specialty Business.  We generally use direct mail
catalogs to reach our broader customer base.  We
distribute seven major specialty catalogs, one for each
of our Childcraft, Sax Arts and Crafts, Frey
Scientific, Sportime, Brodhead Garrett, Gresswell and
Hammond & Stephens lines.  For each product line, a
major catalog containing all product offerings is
distributed toward the end of the calendar year so that
it is available for school buyers at the beginning of
the year.  During the year, various catalog supplements
are distributed to coincide with the peak school buying
season in June through September and following the
start of school in the fall.  Our SmartStuff brand uses
a combination of marketing brochures, outside field
sales and telemarketing to reach its customer base.

     Internet Business. We offer two e-commerce sites,
JuneBox.com and ClassroomDirect.com to facilitate on-
line purchases and shorten the order cycle for
administrators and teachers. Both traditional and
specialty products are available on these sites.

     Pricing.  Pricing for our general and specialty
product offerings varies by product and market channel.
We generally offer a negotiated discount from catalog
prices for supplies from our School Specialty catalog
and respond to quote and bid requests.  The pricing
structure of specialty products offered through direct
marketing is generally not subject to negotiation.

                     Distribution

     We aggregate and distribute products through
seven primary distribution centers (DCs).  Each DC has
specific primary and back-up geographic responsibility and
carries all traditional stock items.  The distribution
system is designed to minimize split shipments and freight
charges as well as manage seasonal peaks.

<PAGE>

          Purchasing and Inventory Management

     We manage our inventory by continually reviewing
daily inventory levels compared to a running 90-day
inventory for the previous year, adjusted for incoming
orders.  We constantly refine the focus of inventory
products through our automated inventory management
system to pursue the optimum level of scope and depth
of product offered.  Inventory forecasts are made daily
for all stock keeping units by assessing anticipated
demand by adjusting historical demand levels to account
for current order activity and available stock as well
as the expected lead time from the supplier.  The
forecast allows inventory purchases to respond quickly
to high seasonal demand while keeping off-season
inventory to a minimum.  The information systems for
all of our distribution centers are connected to allow
transfer of inventory between facilities to fill
regional demand.  In addition, all orders can be
redirected to the distribution center which is the
primary stocking location for a product.  Our inventory
management results in inventory turnover that
management believes is higher than average industry
turnover rates and reduces the level of discontinued,
excess and obsolete inventory compared to businesses
that we have acquired.

     We believe our large size enhances our purchasing
power with suppliers resulting in lower product costs
than most of our competitors.  Further, we believe that
this purchasing power leverage will increase with
additional acquisitions which, in turn, should improve
our operating margins.

     We believe that the primary determinants of
customer satisfaction in the educational supply
industry are the completeness and accuracy of shipments
received and the timeliness of delivery.  We continue
to invest in sophisticated computer systems to automate
the order taking, inventory allocation and management,
and order shipment processes.  As a result, we have
been able to provide superior order fulfillment to our
customers.  In addition, we have developed an order
management system, JuneBox Off-Line, which allows
schools to customize their orders and enter them
electronically and provides historical usage reports to
schools useful for their budgeting process.  While this
system currently only accounts for approximately 6% of
our traditional supply sales, we believe it will become
more significant as schools upgrade their technology
and use of computers.  During the academic year, we
seek to fill orders within 24 hours of receipt of the
order at a 95% fill rate and a 99.5% order accuracy
rate.  During the summer months, we shift to a
production environment and schedule shipments to
coincide with the start of the school year.  During the
summer months our objectives are to meet a 100% fill
rate at a 99.5% order accuracy rate.  Our average order
fill rate for June, July and August 1999 exceeded 98%.
We define "fill rate" as the percentage of line items
in a customer's order that are initially shipped to the
customer in response to the order by the requested ship
date.

     During the peak shipping season between June 1 and
September 30, each of our distribution centers
contracts with local common carriers to deliver our
product to schools and school warehouses.
ClassroomDirect.com and Sax Arts and Crafts rely on
carriers such as Roadway Package Service, United Parcel
Service and the U.S. Postal Service for distribution to
customers.

                  Information Systems

     We believe that through the utilization of
technology in areas such as (1) purchasing and
inventory management, (2) customer order fulfillment
and (3) database management, we are able to turn
inventory more quickly than competitors, offer
customers more convenient and cost effective ways of
ordering products and more precisely focus our sales
and marketing campaigns.

     We use two principal information systems.  In the
traditional and certain specialty businesses, we use a
specialized distribution software package used
primarily by office products and paper marketers.  This
software package is referred to as the Software for
Distributors System (the "SFD system").  This software
offers a fully integrated process from sales order
entry through customer invoicing, and

<PAGE>

inventory requirements planning through accounts payable.
Our system provides information through daily automatic
posting to the general ledger and integrated inventory
control.  We have made numerous enhancements to this
process that allow greater flexibility in addressing
the seasonal requirements of the industry and meeting
specific customer needs.

     The remaining specialty divisions use a mail order
and catalog system provided by Smith-Gardner &
Associates.  The Mail-Order and Catalog System ("MACS")
meets the unique needs of the direct marketing approach
with extensive list management and tracking of multiple
marketing efforts.  The system provides complete and
integrated order processing, inventory control,
warehouse management and financial applications.

     Our software and hardware allow for continued
incremental growth as well as the opportunity to
integrate new client-server and other technologies into
the information systems.

                      Competition

     We operate in a highly competitive environment.
The market is especially competitive on a regional
basis, but we believe our heaviest competition is
coming from alternate channel competitors such as
office product contract stationers and superstores.
Their primary advantages over us are size, location,
greater financial resources and buying power.  Their
primary disadvantage is that their product mix covers
only 15% to 20% of the school's needs (measured by
volume).  In addition, our competitors do not offer
special order fulfillment software, which we believe is
increasingly important to adequately service school
needs.  We believe we compete favorably with these
companies on the basis of service and product offering.

                       Employees

     As of July 1, 2000, we had approximately 2,400
full-time employees.  To meet the seasonal demands of
our customers, we employ many seasonal employees during
the late spring and summer seasons.  Historically, we
have been able to meet our requirements for seasonal
employment.  As of July 1, 2000, approximately 35 full-
time employees were members of the Teamsters Labor
Union at our Sax Arts and Crafts' New Berlin, Wisconsin
facility.  We consider our relations with our employees
to be very good.

              Forward-Looking Statements

     Statements in this Annual Report which are not
strictly historical are "forward-looking" statements.
In accordance with the Private Securities Litigation
Reform Act of 1995, we can obtain a "safe-harbor" for
forward-looking statements by identifying those
statements and by accompanying those statements with
cautionary statements which identify factors that could
cause actual results to differ materially from those in
the forward-looking statements.  Accordingly, the
following information contains or may contain forward-
looking statements:  (1) information included or
incorporated by reference in this Annual Report,
including, without limitation, statements made under
Item 1, Business and Item 7, Management's Discussion
and Analysis of Financial Condition and Results of
Operations, including, without limitation, statements
with respect to growth plans and projected revenues,
operating profits, earnings and costs; (2) information
included or incorporated by reference in our future
filings with the Securities and Exchange Commission
including, without limitation, statements with respect
to growth plans and projected revenues, operating
profits, earnings and costs; and (3) information
contained in written material, releases and oral
statements issued by, or on behalf of, School Specialty
including, without limitation, statements with respect
to growth plans and projected revenues, operating
profits, earnings and costs.  Our actual results may
differ materially from those contained in the forward-looking

<PAGE>

statements identified above.  Factors which may
cause such a difference to occur include, but are not
limited to, the following:

     Potential Liabilities Related to Spin-Offs.  We
became a public company in June 1998 when U.S. Office
Products distributed all of our shares and the shares
of three other companies to its shareholders and we
sold additional shares of our stock in a public
offering.  In connection with these distributions
(known as the "spin-offs"), we and the other three
companies whose shares were distributed each agreed
with U.S. Office Products that if any of us took any
action or failed to act in a way that materially caused
the distributions to be taxable, then U.S. Office
Products could require any of us to pay to it the full
amount of the tax losses it suffered as a result of the
distributions.  We and the three other spin-off
companies also agreed that if the distributions became
taxable for any other reason, we would each pay to U.S.
Office Products a portion of its tax losses based on
the relative aggregate value of each company's common
stock immediately after the distributions. We also
agreed with the other three spin-off companies that if
one or more of us materially caused the distributions
to be taxable and any of the other companies were
required to pay tax losses under the agreement to U.S.
Office Products, then the company or companies that
materially caused the distributions to be taxable would
reimburse the other companies for such payments.

     In addition, we and the other three spin-off
companies each agreed with U.S. Office Products to pay
a portion of the securities law and general liabilities
of U.S. Office Products arising prior to the
distributions and, if any of the spin-off companies
fails to pay its portion, to pay a portion of the
unpaid amount.  The maximum aggregate amount we can be
required to pay for all shared liabilities is limited
by the agreement to $1.75 million (including as a
result of defaults by the other spin-off companies).
U.S. Office Products has been named as a defendant in
various class action lawsuits relating to the
distributions that allege, among other things,
violations of the federal securities laws.

     Material Amount of Goodwill. Approximately $192.7
million, or 42%, of our total assets as of April 29,
2000 represents intangible assets, the significant
majority of which is goodwill.  Goodwill is the amount
by which the costs of an acquisition accounted for
using the purchase method exceeds the fair value of the
net assets we acquire.  We are required to record
goodwill as an intangible asset on our balance sheet
and to amortize it over a period of years.  We
generally amortize goodwill for each acquisition on a
straight line method over a period of 40 years.  Even
though it reduces our net income for accounting
purposes, amortization of goodwill may not be
deductible for tax purposes.  In addition, we are
required to periodically evaluate whether we can
recover our remaining goodwill from the undiscounted
future cash flows that we expect to receive from the
operations of the acquired companies.  If these
undiscounted future cash flows are less than the
carrying value of the associated goodwill, the goodwill
is impaired and we must reduce the carrying value of
the goodwill to equal the discounted future cash flows
and take the amount of the reduction as a charge
against our income.  Reductions in our net income
caused by the amortization or write down of goodwill
could materially adversely affect our results of
operations.

     Dependence on Growth of Student Population and
School Expenditures.  Our growth strategy and
profitability also depend on growth in the student
population and expenditures per student in public and
private elementary and secondary schools.  The level of
student enrollment is largely a function of
demographics, while expenditures per student are also
affected by government budgets and the prevailing
political and social attitudes towards education.  Any
significant and sustained decline in student enrollment
and/or expenditures per student could have a material
adverse effect on our business, financial condition and
results of operations.

     Seasonality of Our Business.  Our educational
supply businesses are highly seasonal.  Because most of
our customers want their school supplies delivered
before or shortly after the commencement of

<PAGE>

the school year, we make most of our sales from May to
October.  As a result, we usually earn more than 100% of our
annual net income in the first six months of our fiscal
year and operate at a loss in our third and fourth
fiscal quarters.  This seasonality causes our operating
results to vary considerably from quarter to quarter.

     Dependence on Key Suppliers and Service Providers.
We depend upon a limited number of suppliers for some
of our products, especially furniture.  We also depend
upon a limited number of service providers for the
delivery of our products.  If these suppliers or
service providers are unable to provide the products or
services that we require or materially increase their
costs (especially during our peak season of June
through September), this could impair our ability to
deliver our products on a timely and profitable basis
and could have a material adverse effect on our
business, financial condition and results of
operations. As we seek to reduce the number of our
suppliers and to minimize duplicative lines as part of
our business strategy, we are likely to increase our
dependence on remaining vendors.

     Reliance on Key Personnel.  Our business depends
to a large extent on the abilities and continued
efforts of current executive officers and senior
management, including Daniel P. Spalding, our Chief
Executive Officer.  We are also likely to depend
heavily on the executive officers and senior management
of businesses that we acquire in the future.  If any of
these people become unable or unwilling to continue in
his or her present role, or if we are unable to attract
and retain other qualified employees, our business
could be adversely affected.  Although we have
employment contracts with most executive officers, we
do not have employment agreements with our senior
management.  We do not have and do not intend to obtain
key man life insurance covering any of our executive
officers or other members of senior management.

     Competition.  The market for school supplies is
highly competitive and fragmented.  We estimate that
over 3,400 companies market educational materials to
schools for pre-kindergarten through twelfth grade as a
primary focus of their business.  We also face
increasing competition from alternate channel
marketers, including superstores and office product
contract stationers, that have not traditionally
focused on marketing school supplies.  These
competitors are likely to continue to expand their
product lines and interest in school supplies.  Some of
these competitors have greater financial resources and
buying power than we do.  We believe that the
educational supplies market will consolidate over the
next several years, which is likely to increase
competition in our markets and in our search for
attractive acquisition candidates.

     Dependence on Our Systems.  We believe that one of
our competitive advantages is our information systems,
including our proprietary PC-based customer order
management system, JuneBox Off-Line.  We have
integrated the operations of almost all of our
divisions and subsidiaries and their information
systems are linked to host systems located at our
headquarters in Appleton, Wisconsin and at two other
locations.  If any of these links disrupted or become
unavailable, this could materially and adversely affect
our business, results of operations and financial
condition.

     Several of our recently-acquired divisions and/or
subsidiaries as well as Gresswell (our U.K. subsidiary)
use predecessor information systems.  With the
exception of Gresswell, we intend to convert the
information systems of these businesses to one of our
host systems as soon as practicable.  However, none of
these businesses has a backup computer system or backup
extra communication lines.  Even though we have taken
precautions to protect ourselves from events that could
interrupt the operations of these businesses and intend
to do so for other businesses we acquire in the future,
we cannot be sure that a fire, flood or other natural
disaster affecting their systems would not disable the
system or prevent the system from communicating with
our other businesses.  The occurrence of any of these
events could have a material adverse effect on our
results of operations and financial condition.

<PAGE>

     Absence of Dividends.  We do not expect to pay
cash dividends on our Common Stock in the foreseeable
future.  In addition, our ability to pay dividends may
be restricted from time to time by the financial
covenants contained in our credit agreements and debt
instruments.  Our current credit facility contains
restrictions on, and in some circumstances may prevent,
our payment of dividends.

     Leverage.  As of April 29, 2000, we had $161.9
million of bank debt outstanding.  In addition, our
leverage could increase over time.  Our credit facility
permits us to incur additional debt under certain
circumstances and we expect to borrow under our credit
facility for general corporate purposes, including
working capital and for acquisitions.

     Our ability to meet our debt service obligations
depends on our future performance.  Our future
performance is influenced by general economic
conditions and by financial, business and other factors
affecting our operations, many of which are beyond our
control.  If we are unable to service our debt, we may
have to delay our acquisition program, sell our equity
securities, sell our assets, or restructure and
refinance our debt.

We cannot give our stockholders any assurance that, if
we are unable to service our debt, it is likely to have
a material adverse effect on the company.

Item 2.  Properties

     Our corporate headquarters are located in an owned
facility  at 1000 North Bluemound Drive, Appleton,
Wisconsin, a combined office and warehouse facility of
approximately 120,000 square feet. We lease or own the
following principal facilities:

                                Approximate
                                  Square       Owned/
          Locations               Footage      Leased       Lease Expiration

Agawam, Massachusetts             163,300       Owned               -
Atlanta, Georgia                   77,000      Leased       January 6, 2002
Birmingham, Alabama               180,365      Leased       November 30, 2006
Bowling Green, Kentucky            42,000      Leased       June 30, 2001
Fremont, Nebraska                  95,000      Leased       June 30, 2003
Fresno, California                163,200      Leased       November 1, 2009
Hoddesdon, England                 47,500      Leased       September 24, 2006
Lancaster, Pennsylvania            73,000      Leased       December 31, 2002
Lancaster, Pennsylvania           204,000      Leased       February 28, 2009
Lufkin, Texas                     140,000       Owned               -
Mansfield, Ohio                   323,000       Owned               -
New Berlin, Wisconsin              97,500      Leased       March 31, 2002
Salina, Kansas                    123,000       Owned               -
__________

     The 73,000 square foot Lancaster, Pennsylvania
facility is used for manufacturing and the Fremont,
Nebraska facility is used for production of school
forms.

     We believe that our properties, as enhanced for
our ongoing expansion, are adequate to support our
operations for the foreseeable future.  We regularly
review the utilization and consolidation of our
facilities.

<PAGE>

Item 3.  Legal Proceedings

     We are, from time to time, a party to legal
proceedings arising in the normal course of business.
Our management believes that none of these legal
proceedings will materially or adversely affect our
financial position, results of operations or cash
flows.

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

     There were no matters submitted during the quarter
ended April 29, 2000 to a vote of our security holders.

         EXECUTIVE OFFICERS OF THE REGISTRANT

     As of July 10, 2000, the record date of our 2000
Annual Meeting of Stockholders, the following persons
served as executive officers of School Specialty:

 Name and Age
  of Officer

Daniel P. Spalding      Mr. Spalding became Chairman of the Board and
    Age 45              Chief Executive Officer of School Specialty in
                        February 1998.  From 1996 to February 1998, Mr.
                        Spalding served as President of the Educational
                        Supplies and Products Division of U.S. Office
                        Products.  From 1988 to 1996, he served as
                        President, Chief Executive Officer and a
                        director of School Specialty's predecessor.
                        Prior to 1988, Mr. Spalding was an officer of
                        JanSport, a manufacturer of sports apparel and
                        backpacking equipment. Mr. Spalding was a
                        co-founder of JanSport and served as President
                        and Chief Executive Officer from 1977 to 1984.
                        Mr. Spalding has been a director of the National
                        School Supply and Equipment Association since
                        1992 and completed his term as the association's
                        Chairman in November 1997.

David J. Vander Zanden  Mr. Vander Zanden became the President and Chief
    Age 45              Operating Officer of School Specialty in March
                        1998.  From 1992 to March 1998, he served as
                        President of Ariens Company, a manufacturer of
                        outdoor lawn and garden equipment.  Mr. Vander
                        Zanden has served as a director of School
                        Specialty since completion of the spin-off from
                        U.S. Office Products in June 1998.

Mary M. Kabacinski      Ms. Kabacinski, a Certified Public Accountant,
    Age 51              has served as Executive Vice President and Chief
                        Financial Officer since August 1999. From 1989
                        to 1999, she served as Executive Vice President
                        and Chief Financial Officer for Marquette
                        Medical Systems, a manufacturer of medical
                        devices.

<PAGE>

Donald J. Noskowiak     Mr. Noskowiak has served as Vice President
    Age 42              Finance/Business Development since August 1999.
                        Mr. Noskowiak has been with School Specialty
                        since 1992, and served as Chief Financial
                        Officer from 1997 to August 1999.

Melvin D. Hilbrown      Mr. Hilbrown has served as Executive Vice
    Age 52              President of School Specialty and Managing
                        Director for Gresswell since completion of the
                        spin-off from U.S. Office Products in June 1998.
                        Mr. Hilbrown joined School Specialty as Managing
                        Director of Gresswell with School Specialty's
                        acquisition of Don Gresswell, Ltd. in 1997. He
                        had been Managing Director of Gresswell since
                        1989.

Richard H. Nagel        Mr. Nagel has served as Executive Vice President
    Age 59              of School Specialty for Sax Arts and Crafts
                        since June 1998.  Mr. Nagel joined School
                        Specialty with the acquisition of Sax Arts and
                        Crafts in 1997.  Mr. Nagel has been with Sax
                        Arts and Crafts since 1975.

Donald Ray Pate, Jr.    Mr. Pate has served as Executive Vice President
    Age 37              of School Specialty for ClassroomDirect.com
                        since June 1998.  Mr. Pate joined School
                        Specialty with the acquisition of Re-Print in
                        1996, having served as President of Re-Print
                        since he acquired it in 1988.

Ronald E. Suchodolski   Mr. Suchodolski has served as Executive Vice
    Age 54              President of School Specialty for Childcraft
                        since 1998.  Mr. Suchodolski joined School
                        Specialty with the acquisition of Childcraft in
                        1997.  Mr. Suchodolski was Vice President of
                        Childcraft in 1995 and 1996 and was Director of
                        Childcraft's school division from 1984 to 1989.
                        From 1989 to 1993, Mr. Suchodolski was President
                        of the Judy/Instructo Division of Paramount, and
                        from 1993 to 1995, Mr. Suchodolski served as
                        Senior Vice President of Sales and Marketing for
                        Paramount Publishing's Supplementary Materials
                        Division.

Michael J. Killoren     Mr. Killoren has served as Executive Vice
    Age 43              President and Chief Information Officer of
                        JuneBox.com, Inc., since June 2000.  From 1999
                        through June 2000, Mr. Killoren served as Vice
                        President and Chief Information Officer of
                        School Specialty. Mr. Killoren was Chief
                        Operating Officer of School Specialty
                        Distribution from 1997 to 1999 and Vice
                        President Operations from 1992 to 1997. Mr.
                        Killoren joined School Specialty in 1980.

Brian E. Chapin         Mr. Chapin has served as Executive Vice
    Age 48              President of School Specialty for SmartStuff
                        since School Specialty acquired SmartStuff in
                        March 1999.  Mr. Chapin served as President of
                        SmartStuff since he founded it in 1993.

Peter S. Savitz         Mr. Savitz has served as Executive Vice
    Age 51              President of School Specialty for Sportime since
                        School Specialty acquired Sportime in February
                        1999.  Mr. Savitz has been with Sportime since
                        1972.

Garett H.D. Reid        Mr. Reid has served as Executive Vice President
    Age 60              of School Specialty for Frey Scientific since
                        School Specialty acquired National School Supply
                        Company (Beckley-Cardy) in August 1998.  Mr.
                        Reid served as Vice President of Marketing and
                        Sales in Science & Media with the Beckley-Cardy
                        Group since 1989.

<PAGE>

Joseph F. Franzoi IV    Mr. Franzoi has served as Corporate Counsel
    Age 45              since June 1998 and became a part-time employee
                        of JuneBox.com, Inc., in June 2000. Mr. Franzoi
                        has practiced corporate law with Franzoi and
                        Franzoi, S.C., from 1980 to the present,
                        concentrating in the area of mergers and
                        acquisitions.

     Daniel P. Spalding and Michael J. Killoren are
cousins.

     The term of office of each executive officer is
from one annual meeting of the Board of Directors until
the next annual meeting of the Board of Directors or
until a successor for each is selected.

     There are no arrangements or understandings
between any of our executive officers and any other
person (not an officer or director of School Specialty
acting as such) pursuant to which any of our executive
officers were selected as an officer of School
Specialty.

                        PART II

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

Market Information

     Our Common Stock has traded under the symbol
"SCHS" on the Nasdaq National Market since June 10,
1998.  There was no market for the Common Stock prior
to that date.  The table below sets forth the reported
high and low closing sale prices for shares of the
Common Stock on the Nasdaq National Market during the
indicated quarters.

                                               High       Low
     Fiscal quarter ended                      ----       ---
     --------------------
     July 24, 1999                           $19.3125  $14.3125
     October 23, 1999                         17.3750   11.8750
     January 22, 2000                         16.6250   12.1250
     April 29, 2000                           23.1250   14.1250

                                               High       Low
     Fiscal quarter ended                      ----       ---
     --------------------
     July 25, 1998                           $17.8750  $14.3750
     October 24, 1998                         17.0000   10.6250
     January 23, 1999                         25.0625   13.8750
     April 24, 1999                           25.8750   17.7500


Holders

     As of July 1, 2000, there were 2,609 record
holders of the Common Stock.

Historical Dividends

     We have not declared or paid any cash dividends on
our Common Stock to date.  We currently intend to
retain our future earnings, if any, to finance the
growth, development and expansion of our business.
Accordingly, we do not expect to pay cash dividends on
our Common Stock in the foreseeable future.  In
addition, our ability to pay dividends may be
restricted or prohibited from time to time by financial
covenants in our credit agreements and debt
instruments.  Our current credit facility contains
restrictions on, and in some circumstances may prevent,
our payment of dividends.

<PAGE>

Item 6.  Selected Financial Data

                    SELECTED HISTORICAL FINANCIAL DATA
               (in thousands, except per share data)  (1)(2)

<TABLE>

                                      Fiscal Year Ended                   Four     Fiscal Year
                          -------------------------------------------    Months       Ended
                          (53 Weeks) (52 Weeks) (52 Weeks) (52 Weeks)     Ended     (52 Weeks)
                           April 29,  April 24,  April 25,  April 26,   April 30,  December 31,
                             2000       1999       1998       1997        1996         1995
                             ----       ----       ----       ----        ----         ----
             <S>              <C>        <C>        <C>        <C>         <C>          <C>
Statement of Income Data:
Revenues                   $639,271   $521,704   $310,455   $191,746    $ 28,616     $150,482
Cost of revenues            406,043    341,783    202,870    126,862      18,591       98,233
                           --------   --------   --------   --------    --------     --------
  Gross profit              233,228    179,921    107,585     64,884      10,025       52,249
Selling, general and
 administrative expenses    184,586    144,659     87,846     53,177      11,917       47,393
Non-recurring acquisition
 costs                            -          -          -      1,792       1,122            -
Restructuring costs               -      5,274      3,491        194           -        2,532
                           --------   --------   --------   --------    --------     --------
  Operating income (loss)    48,642     29,988     16,248      9,721      (3,014)       2,324
Interest expense (net)       13,151     12,601      5,373      4,197       1,455        5,536
Other (income) expense        1,856       (228)       156       (196)         67          (18)
                           --------   --------   --------   --------    --------     --------
  Income (loss) before
   provision for (benefit
   from) income taxes        33,635     17,615     10,719      5,720      (4,536)      (3,194)
Provision for (benefit
 from) income taxes (3)      15,120      8,719      5,480     (2,412)        139          173
                           --------   --------   --------   --------    --------     --------
  Net income (loss)        $ 18,515   $  8,896   $  5,239   $  8,132    $ (4,675)    $ (3,367)
                           ========   ========   ========   ========    ========     ========
Net income (loss)
 per share:
  Basic                    $   1.06   $   0.61   $   0.40   $   0.81    $  (0.54)    $  (0.51)
  Diluted                  $   1.06   $   0.60   $   0.39   $   0.80    $  (0.53)    $  (0.50)
Weighted average
 shares outstanding:
  Basic                      17,429     14,690     13,284     10,003       8,611        6,562
  Diluted                    17,480     14,840     13,547     10,196       8,789        6,669


                           April 29,  April 24,  April 25,  April 26,    April 30,    December 31,
                             2000       1999       1998       1997         1996           1995
                             ----       ----       ----       ----         ----           ----
Balance Sheet Data:
Working capital (deficit)  $117,018   $115,853   $ 47,791   $ 14,491    $ (3,663)    $  (1,052)
Total assets                454,849    437,708    223,729     87,685      54,573        54,040
Long-term debt              144,789    161,691     63,014     33,792      15,031        15,294
Total debt                  162,180    173,285     83,302     60,746      40,918        39,783
Stockholders' equity
 (deficit)                  224,993    202,687    106,466     16,329      (4,267)         (620)

</TABLE>
__________

(1) The historical financial information of School
    Specialty, Inc., a Wisconsin corporation, and The
    Re-Print Corp., both of which were acquired by U.S.
    Office Products in business combinations accounted for
    under the pooling-of-interests method in May 1996 and
    July 1996, respectively, have been combined on a
    historical cost basis in accordance with generally
    accepted accounting principles ("GAAP") to present this
    financial data as if the two companies had always been
    members of the same operating group.  All business
    acquisitions since July 1996 have been accounted for
    under the purchase method.  The financial information
    of the businesses acquired in business combinations
    accounted for under the purchase method is included
    from the dates of their respective acquisitions.

(2) Certain amounts previously reported have been
    reclassified to conform with the fiscal 2000
    presentation. These reclassifications have no effect on
    net income or net income per share.

<PAGE>


(3) Results for the fiscal year ended April 26,
    1997 include a benefit from income taxes of $2.4
    million which primarily resulted from the reversal
    of a $5.3 million valuation allowance in the quarter
    ended April 26, 1997.  The valuation allowance had
    been established in 1995 to offset the tax benefit
    from net operating loss carryforwards included in
    our deferred tax assets, because at the time it was
    not likely that such tax benefit would be realized.
    The valuation allowance was reversed subsequent to
    our being acquired by U.S. Office Products, because
    it was deemed "more likely than not," based on
    improved results, that such tax benefit would be
    realized.

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

     You should read this Management's Discussion and
Analysis of Financial Condition and Results of
Operations together with the consolidated financial
statements and related notes, included elsewhere in
this Annual Report.

Overview

     We are the largest marketer of non-textbook
educational supplies and furniture to schools for pre-
kindergarten through twelfth grade.  We offer more than
72,000 items through an innovative two-pronged
marketing approach that targets both school
administrators and individual teachers.  Our broad
product range enables us to provide our customers with
one source for virtually all of their non-textbook
school supplies and furniture needs. We have grown
significantly in recent years both through internal
growth and acquisitions.

     Revenues have increased from $150.5 million in
fiscal 1995 to $639.3 million in fiscal  2000.  This
increase is driven primarily by internal growth and
acquisitions.  Our revenues for fiscal 2000 were $639.3
million and our operating income before restructuring
costs was $48.6 million, which represented compound
annual increases of 40% and 70%, respectively, compared
to our historical results for fiscal 1995.

     Our gross margin has improved in recent years
primarily due to acquisitions and increased buying
power.  We have acquired many specialty businesses,
which tend to have higher gross margins than our
traditional business.  In addition, our acquisitions of
both specialty and traditional businesses have
increased our buying power, resulting in reduced costs
of the products we purchase.

     Our operating margins have also improved
significantly over the last several years.  This
improvement reflects our recent acquisitions of
specialty companies which typically have higher
operating margins than our traditional businesses.  In
addition, through the integration of acquired
businesses, we have been able to further improve our
operating margins by eliminating redundant expenses,
leveraging overhead costs and improving purchasing
power.  While we have already achieved significant
operating margin improvements from the acquisitions we
have made to date, we believe there are still
opportunities to eliminate redundant expenses.

     Our effective tax rate is higher than the federal
statutory tax rate of 35%, due primarily to non-
deductible goodwill amortization and state taxes.

     Our business and working capital needs are highly
seasonal with peak sales levels occurring from May
through October.  During this period, we receive, ship
and bill the majority of our orders so that schools and
teachers receive their merchandise by the start of each
school year.  Our inventory levels increase in May
through June in anticipation of the peak shipping
season.  The majority of shipments are made between May
and October and the majority of cash receipts are
collected from September through December.  As a
result, we usually earn more than 100% of our annual
net income in the first six months of our fiscal year
and operate at a loss in our third and fourth fiscal
quarters.

<PAGE>

Results of Operations

     The following table sets forth certain information
as a percentage of revenues on a historical basis
concerning our results of operations for fiscal 2000,
fiscal 1999, and fiscal 1998.

                                            Fiscal Year Ended
                               April 29, 2000   April 24, 1999   April 24, 1998
                                (53 Weeks)       (52 Weeks)       (52 Weeks)
                               --------------   --------------   -------------
Revenues                           100.0%           100.0%           100.0%
Cost of revenues                    63.5             65.5             65.3
                                  -------          -------          -------
   Gross profit                     36.5             34.5             34.7
Selling, general and
 administrative expenses            28.9             27.7             28.3
Restructuring and strategic
 restructuring acquisition costs       -              1.0              1.1
                                  -------          -------          -------
   Operating income                  7.6              5.8              5.3
Interest expense, net                2.1              2.4              1.8
Other expense                        0.2                -              0.1
Income before provision for       -------          -------          -------
 income taxes                        5.3              3.4              3.4
Provision for income taxes           2.4              1.7              1.8
                                  -------          -------          -------
Net income                           2.9%             1.7%             1.6%
                                  =======          =======          =======

Consolidated Historical Results of Operations

Year Ended April 29, 2000 (53 weeks) Compared to Year
Ended April 24, 1999 (52 weeks)

Revenues


     Revenues increased 22.5% from $521.7 million for
fiscal 1999 to $639.3 million for fiscal 2000.  This
increase is primarily due to internal growth on
existing business and the inclusion of revenues from
the six companies acquired in business combinations
accounted for under the purchase method of accounting
since the beginning of fiscal 1999.


Gross Profit


     Gross profit increased 29.6% from $179.9 million,
or 34.5% of revenues, in fiscal 1999 to $233.2 million,
or 36.5% of revenues, in fiscal 2000.  The increase in
gross profit as a percentage of revenues was due
primarily to (1) a shift in product mix to increased
revenue from the specialty business, where proprietary
products generate higher gross margins than the
traditional business, (2) an improvement in traditional
business gross margins, driven primarily by more
favorable pricing and the elimination of less
profitable products from our product offering, and (3)
an improvement in specialty business gross margin,
which was driven by more favorable product mix and
contributions from Sportime, which was acquired in
February of fiscal 1999, and has higher gross margins
than most of our other businesses.  These increases
were slightly offset by contributions from the Internet
business, which as a group has lower gross margins than
our other businesses.


Selling, General and Administrative Expenses


     Selling, general and administrative expenses
include selling expenses (the most significant
component of which is sales wages and commissions),
operations expenses (which includes customer service,
warehouse and outbound transportation costs), catalog
costs, general administrative overhead (which includes
information systems, accounting, legal, and human
resources) and depreciation and amortization expense.

<PAGE>

     Selling, general and administrative expenses
increased 27.6% from $144.7 million, or 27.7% of
revenues, in fiscal 1999 to $184.6 million, or 28.9% of
revenues, in fiscal 2000.  The increase in selling,
general and administrative expense is primarily due to
an increase in revenue.  The increase in selling,
general and administrative expense as a percent of
revenue is primarily due to (1) a shift in revenue mix
to the specialty business, which has higher selling,
general and administrative expenses than the
traditional business, (2) higher amortization expense
due to goodwill amortization related to the six
acquisitions we have completed since the beginning of
fiscal 1999, and (3) expenses related to expanding the
Internet business, which are incremental in fiscal
2000.  These increases are offset by reduced selling,
general and administrative expenses in the traditional
business, which is primarily due to the integration of
Beckley-Cardy and the restructuring of the traditional
business, which began in the second quarter of fiscal
1999.

Restructuring Costs

     During fiscal 1999, we recorded a strategic
restructuring charge of $1.1 million in the first
quarter and $4.2 million in the second quarter, for a
total of $5.3 million during fiscal 1999.  The $1.1
million charge related to a one-time, non-cash charge
for compensation expense attributed to U.S. Office
Product's stock option tender offer and the sale of
shares of Common Stock to some of our executive
management personnel.  The $4.2 million charge was to
consolidate existing warehousing, customer service and
sales operations.  Further details of the restructuring
charge are discussed in the notes to consolidated
financial statements.

Net Interest Expense and Other Expenses

     Net interest expense increased $0.6 million from
$12.6 million, or 2.4% of revenues, in fiscal 1999, to
$13.2 million, or 2.1% of revenues in fiscal 2000.  The
increase in net interest expense is primarily
attributed to the debt assumed and cash paid for the
six companies acquired since the beginning of fiscal
1999, partially offset by debt repaid from the net
proceeds from our secondary offering in April 1999.
Other expenses of $1.9 million for fiscal 2000
primarily represents the loss on the disposal of a
facility donated to a municipality and a non-cash
impairment charge on a minority investment.

Provision for Income Taxes

     Provision for income taxes for fiscal 2000
increased 73.4% or $6.4 million over fiscal 1999,
reflecting income tax rates of 45.0% and 49.5% in
fiscal 2000 and fiscal 1999, respectively.  The
decrease in the effective tax rate is primarily due to
a decline in the effective state tax rate and a
reduction in the amount of non-deductible goodwill
amortization.  The higher effective tax rate, as
compared to the federal statutory rate of 35.0%, is
primarily due to state income taxes and non-deductible
goodwill amortization.

Fiscal Year Ended April 24, 1999 Compared to Fiscal Year Ended April 25, 1998

Revenues

  Consolidated revenues increased 68.0%, from $310.5
million for fiscal 1998 to $521.7 million for fiscal
1999.  This increase was due primarily to the inclusion
of revenues of thirteen businesses acquired since the
beginning of fiscal l998 and internal growth on
existing businesses.

<PAGE>

Gross Profit

     Gross profit increased 67.2%, from $107.6 million
in fiscal 1998 to $179.9 million in fiscal 1999
primarily due to the acquisitions referred to above.
Gross profit as a percent of revenues declined slightly
from 34.7% in fiscal 1998 to 34.5% in fiscal 1999.
This decline was due primarily to a reduction in
traditional business gross margin, driven by the
acquisition of  Beckley-Cardy, which had lower gross
margins than our existing traditional business and an
increase in lower margin bid revenues.  These
reductions were offset by an increase in specialty
business revenue, which typically has higher gross
margins than the traditional business.

Selling, General and Administrative Expense

     Selling, general and administrative expenses
increased 64.7%, from $87.8 million in fiscal 1998 to
$144.7 million in fiscal 1999, due primarily to the
acquisitions referred to above.  As a percentage of
revenues, these expenses declined 0.6% from 28.3% for
fiscal 1998 to 27.7% for fiscal 1999.  The decrease in
selling, general and administrative expenses as a
percentage of revenues was the result of cost savings
attributable to the integration of companies acquired
during fiscal 1998 and the consolidation of our
warehousing, sales and customer service operations
under the restructuring of the traditional business
which began in the second quarter of fiscal 1999.
These decreases were offset by increases attributable
to the acquisition of Beckley-Cardy in the second
quarter of fiscal 1999 (which had higher selling,
general and administrative expenses as a percentage of
revenues than our existing businesses) and higher
depreciation and amortization expenses due to the
thirteen companies acquired since the beginning of
fiscal 1998.

Restructuring Costs

     During fiscal 1999, we recorded a strategic
restructuring charge of $1.1 million in the first
quarter and $4.2 million in the second quarter, for a
total of $5.3 million during fiscal 1999.  The $1.1
million charge related to a one-time, non-cash charge
for compensation expense attributed to U.S. Office
Product's stock option tender offer and the sale of
shares of Common Stock to some of our executive
management personnel, net of underwriting discounts.
The $4.2 million charge was to consolidate existing
warehousing, customer service and sales operations.
Further details of the restructuring charge are
discussed in the notes to consolidated financial
statements.

Net Interest Expense

     Net interest expense increased 134.5%, from $5.4
million, or 1.8% of revenues, for fiscal 1998 to $12.6
million, or 2.4% of revenues, for fiscal 1999.  The
increase in net interest expense is primarily
attributed to the debt assumed and cash paid for the
thirteen companies acquired since the beginning of
fiscal 1998, offset by debt repaid from the proceeds
from our secondary public offering in April 1999, our
initial public offering in June 1998, and the
forgiveness of debt from U.S. Office Products in
connection with the spin-off.

Provision for Income Taxes

     Provision for income taxes increased 59.1% from
$5.5 million for fiscal 1998 to $8.7 million for fiscal
1999, reflecting effective income tax rates of 49.5%
and 51.1% for fiscal 1999 and fiscal 1998,
respectively.  The higher effective tax rate, compared
to the federal statutory rate of 35%, is primarily due
to state income taxes and non-deductible goodwill
amortization.

<PAGE>

Liquidity and Capital Resources

     At April 29, 2000, we had working capital of
$117.0 million.  Our capitalization at April 29, 2000
was $386.9 million and consisted of bank debt of $161.9
million and stockholders' equity of $225.0 million.

     We currently have a five year secured $350 million
revolving credit facility with Bank of America, N.A.
The credit facility has a $100 million term loan
payable quarterly over five years commencing in January
1999 and revolving loans which mature on September 30,
2003.  The amount outstanding as of April 29, 2000
under the credit facility was approximately $161.9
million, consisting of $75.6 million outstanding under
the revolving loan portion of the facility and $86.3
million outstanding under the term loan portion of the
facility.  Borrowings under the credit facility are
usually significantly higher during our first and
second quarters to meet the working capital needs of
our peak selling season.  On October 28, 1998, we
entered into an interest rate swap agreement with the
Bank of New York covering $50 million of the
outstanding credit facility.  The agreement fixes the
30 day LIBOR interest rate at 4.37% per annum (floating
LIBOR on April 29, 2000 was 6.18%) on the $50 million
notional amount and has a three year term that may be
canceled by the Bank of New York on the second
anniversary.  As of April 29, 2000, the effective
interest rate on borrowings under our credit facility
was approximately 8.3% excluding the effect of the swap
agreement and 7.8% including the effect of the swap
agreement.  In fiscal 2000, we borrowed under the
credit facility primarily for seasonal working capital
and capital expenditures. During fiscal 2000, we made
certain immaterial changes to certain financial and
other covenants under our credit facility.

     On April 16, 1999, we sold 2,400,000 shares of
Common Stock in a public offering for $40.8 million in
net proceeds.  On May 17, 1999, we sold an additional
151,410 shares of Common Stock to cover over-allotments
for $2.2 million in net proceeds.  The total proceeds
were used to reduce indebtedness outstanding under our
credit facility.

     On June 9, 1998, we sold 2,125,000 shares of
Common Stock in a public offering for $30.6 million in
net proceeds and we sold 250,000 shares of Common Stock
in a concurrent offering directly to certain executive
officers of School Specialty for aggregate
consideration of $3.6 million. In connection with the
offerings, we incurred approximately $1.5 million of
expenses. The total net proceeds to us from the
offerings were $32.7 million. The net proceeds were
used to reduce indebtedness outstanding under our
credit facility.

     During fiscal 2000, net cash provided by operating
activities was $31.1 million. This net cash provided by
operating activities during the period is indicative of
the high seasonal nature of the business, with sales
occurring in the first and second quarter of the fiscal
year and cash receipts in the second and third
quarters. Net cash used in investing activities was
$27.3 million, including $1.3 million for acquisitions,
$17.3 million for additions to property and equipment
and $8.7 million for other long term assets.
Investments in other long term assets include $3.0
million for a minority interest in A Better Way of
Learning which is an e-commerce fulfillment partner of
School Specialty, $2.8 million for software licensing
to power JuneBox.com, our purchasing portal for
schools, $1.7 million to purchase the net assets of a
division of a furniture manufacturer and a compilation
of other long term investments.

     Net payments of $9.4 million were made to reduce
indebtedness under the credit facility, using $2.2
million in proceeds from the issuance of Common Stock,
as well as cash from operations and cash on hand.

<PAGE>

     During fiscal 1999, net cash provided by operating
activities was $27.6 million. Net cash used in
investing activities was $127.2 million, including
$122.3 million for acquisitions and $4.9 million for
additions to property and equipment and other.  Net
cash provided by financing activities was $109.4
million.  Borrowing under the credit facility included
(1) $0.8 million used to fund the cash portion of the
purchase price of the Holsinger acquisition, (2) $3.7
million used to fund the purchase price of the
SmartStuff acquisition, (3) $23 million used to fund
the purchase price of the Sportime acquisition, (4)
$16.5 million used to fund the cash portion of the
purchase price of the Hammond & Stephens acquisition,
(5) $134.7 million used to fund the Beckley-Cardy
acquisition consisting of $78.1 million for the
purchase price and $56.6 million for debt repayment,
(6) $83.3 million used to repay the U.S. Office
Products debt in connection with the spin-off and (7)
$67.8 million used for short-term funding of seasonal
working capital and the purchase of property and
equipment.  The $32.7 million net proceeds from our
initial public offering and concurrent offering to
certain officers and directors and $40.6 million of the
net proceeds from our public offering in April 1999
were used to repay a portion of the funds borrowed
under the credit facility.  U.S. Office Products
contributed capital of $7.2 million as required under
the distribution agreement entered into with us in
connection with the spin-off.

     During fiscal 1998, net cash provided by operating
activities was $3.7 million.  Net cash used in
investing activities was $99.7 million, including $95.7
million for acquisitions and $4.0 million for additions
to property and equipment and other.  Net cash provided
by financing activities was $96.0 million, including
$95.7 million provided by U.S. Office Products to fund
the cash portion of the purchase price and the
repayment of debt assumed with the acquisition of the
Fiscal 1998 Purchased Companies, $81.3 million of which
was considered a contribution of capital by U.S. Office
Products, partially offset by $8.4 million used to
repay indebtedness.

     Our anticipated capital expenditures for the next
twelve months are expected to be $13 million.  The
largest items include software development for our
Internet initiative, computer hardware and software and
warehouse equipment.

     We anticipate that our cash flow from operations
and borrowings available from our existing credit
facility will be sufficient to meet our liquidity
requirements for operations, including capital
expenditures, and our debt service obligations.

Fluctuations in Quarterly Results of Operations

     Our business is subject to seasonal influences.
Our historical revenues and profitability have been
dramatically higher in the first two quarters of our
fiscal year (May-October) primarily due to increased
shipments to customers coinciding with the start of
each school year.

     Quarterly results also may be materially affected
by the timing of acquisitions, the timing and magnitude
of costs related to such acquisitions, variations in
our costs for the products sold, the mix of products
sold and general economic conditions.  Moreover, the
operating margins of companies we acquire may differ
substantially from our own, which could contribute to
further fluctuation in quarterly operating results.
Therefore, results for any quarter are not indicative
of the results that we may achieve for any subsequent
fiscal quarter or for a full fiscal year.

     The following table sets forth certain unaudited
consolidated quarterly financial data for fiscal 2000
(53 weeks) and fiscal 1999 (52 weeks).  We derived this
data from unaudited consolidated financial statements.

<PAGE>


                                  Year Ended April 29, 2000
                      ------------------------------------------------------
                         First     Second     Third      Fourth     Total
                      ---------- ---------- ---------- ---------- ----------
                      (13 weeks) (13 weeks) (13 weeks) (14 weeks) (53 weeks)

Revenues               $194,299    $231,588  $ 97,244    $116,140  $639,271
Gross profit             72,879      82,913    33,429      44,007   233,228
Operating income (loss)  24,564      26,701    (2,245)       (378)   48,642
Net income (loss)        11,364      12,184    (3,032)     (2,001)   18,515

Per share amounts:
   Basic               $   0.65    $   0.70  $  (0.17)   $  (0.11) $   1.06
   Diluted             $   0.65    $   0.70  $  (0.17)   $  (0.11) $   1.06

                                  Year Ended April 24, 1999
                      ------------------------------------------------------
                         First     Second     Third      Fourth     Total
                      ---------- ---------- ---------- ---------- ----------
                      (13 weeks) (13 weeks) (13 weeks) (13 weeks) (52 weeks)

Revenues               $126,657    $212,316  $ 85,359    $ 97,372  $521,704
Gross profit             44,042      70,761    28,093      37,025   179,921
Operating income (loss)  13,326      18,674    (2,383)        371    29,988
Net income (loss)         6,563       7,430    (3,298)     (1,799)    8,896

Per share amounts:
   Basic                $   .45    $    .51  $   (.23)   $   (.12) $    .61
   Diluted              $   .44    $    .51  $   (.23)   $   (.12) $    .60

Inflation

     Inflation has and is expected to have only a minor
affect on our results of operations and our internal
and external sources of liquidity.

Recent Accounting Pronouncements

     In June, 1998, the Financial Accounting
Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133
"Accounting for Derivative Instruments and
Hedging Activities."  SFAS No. 137, which
delays the adoption date of SFAS No. 133 and
was issued in July, 1999, requires adoption
of SFAS No. 133 for annual periods beginning
after June 15, 2000.  SFAS No. 133
establishes standards for recognition and
measurement of derivatives and hedging
activities.  The Company will implement this
statement in fiscal year 2002 as required.
The adoption of SFAS No. 133 is not expected
to have a material effect on the Company's
financial position or results of operations.

     The SEC issued Staff Accounting Bulletin No.
101, "Revenue Recognition" ("SAB No. 101"),
in December 1999, which provides guidance on
the recognition, presentation, and disclosure
of revenue in financial statements.  On June
26, 2000, the SEC issued SAB No. 101B, which
delayed implementation of SAB No. 101.  The
Company will implement SAB No. 101 in the
fourth quarter of fiscal year 2001 as
required by SAB No. 101B.  The company is
reviewing the requirements of SAB No. 101 and
has not yet determined the impact of this
standard on its consolidated financial
statements.  It is not expected, however,
that SAB No. 101 will have a material effect
on the Company's financial position or
results of operations.

<PAGE>

Year 2000

     The Year 2000 issue exists because many computer
systems and applications, including those embedded in
equipment and facilities, use two digit rather than
four digit date fields to designate an applicable year.
As a result, the systems and applications may not
properly recognize the Year 2000 or process data which
include it, potentially causing data miscalculations or
inaccuracies or operational malfunctions or failures.

     Our systems, as well as those of our third party
suppliers, made an uneventful transition from 1999 to
2000. No material disruptions occurred and operations
continued without interruption in the new year. While
initial indications suggest that Year 2000 issues will
not adversely affect our operations, we will continue
to monitor our systems, as well as those of our third
party suppliers, to ensure Year 2000 compliance.

Item 7A.  Quantitative and Qualitative Disclosure About Market Risk

     Our financial instruments include cash and cash
equivalents, accounts receivable, accounts payable,
equity securities and long-term debt.  Market risks
relating to our operations result primarily from
changes in interest rates.  Our borrowings are
primarily dependent upon LIBOR rates.  The estimated
fair value of long-term debt approximates its carrying
value at April 29, 2000.

     We do not hold or issue derivative financial
instruments for trading purposes.  To manage interest
rate risk on the variable rate borrowings under the
revolving portion of our credit facility, we entered
into an interest rate swap agreement during fiscal
1999.  See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -
Liquidity and Capital Resources."  This interest rate
swap agreement has the effect of locking in, for a
specified period, the base interest rate we will pay on
the $50 million notional principal amount established
in the swap.  As a result, while this hedging
arrangement is structured to reduce our exposure to
interest rate increases, it also limits the benefit we
might otherwise have received from any interest rate
decreases.  This swap is usually cash settled monthly,
with interest expense adjusted for amounts paid or
received.  Effects of this swap have been minor for the
year ending April 29, 2000.

<PAGE>

Item 8.  Financial Statements and Supplementary Data

           REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
of School Specialty, Inc.

     In our opinion, the consolidated financial
statements listed in the index appearing under Item
14(a)(1) on page 52 present fairly, in all material
respects, the financial position of School Specialty,
Inc. and its subsidiaries at April 29, 2000, and April
24, 1999, and the results of their operations and
their cash flows for each of the three years in the
period ended April 29, 2000, in conformity with
accounting principles generally accepted in the United
States.  In addition, in our opinion, the financial
statement schedule listed in the accompanying index
appearing under Item 14(a)(2) on page 52 presents
fairly, in all material respects, the information set
forth therein when read in conjunction with the
related consolidated financial statements.  These
financial statements and the financial statement
schedule are the responsibility of the Company's
management; our responsibility is to express an
opinion on these financial statements and the
financial statement schedule based on our audits.  We
conducted our audits of these statements in accordance
with auditing standards generally accepted in the
United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether
the financial statements are free of material
misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting
principles used and significant estimates made by
management, and evaluating the overall financial
statement presentation.  We believe that our audits
provide a reasonable basis for the opinion expressed
above.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Minneapolis, Minnesota
June 9, 2000

<PAGE>

FINANCIAL STATEMENTS



                SCHOOL SPECIALTY, INC.
              CONSOLIDATED BALANCE SHEET
           (In Thousands, Except Share Data)



                                                        April 29,   April 24,
                                                          2000        1999
 ASSETS
Current assets:
 Cash and cash equivalents                              $  4,151    $  9,779
 Accounts receivable, less allowance for doubtful
  accounts of $1,744 and $2,234, respectively             76,028      74,781
 Inventories                                              86,117      78,783
 Prepaid expenses and other current assets                28,664      17,332
 Deferred taxes                                            6,964       8,371
                                                        --------    --------
   Total current assets                                  201,924     189,046


Property and equipment, net                               51,725      42,305
Intangible assets, net                                   192,744     198,710
Deferred taxes                                             1,861       3,810
Other                                                      6,595       3,837
                                                        --------    --------
   Total assets                                         $454,849    $437,708
                                                        ========    ========



 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Current maturities - long-term debt                    $ 17,391    $ 11,594
 Accounts payable                                         48,874      37,050
 Accrued compensation                                      8,634       8,410
 Accrued restructuring                                        65       2,752
 Other accrued liabilities                                 9,942      13,387
                                                        --------    --------
   Total current liabilities                              84,906      73,193

Long-term debt                                           144,789     161,691
Other                                                        161         137
                                                        --------    --------
   Total liabilities                                     229,856     235,021

Commitments and contingencies

Stockholders' equity:
 Preferred stock, $0.001 par value per share,
  1,000,000 shares authorized; none outstanding                -          -
 Common Stock, $0.001 par value per share,
  150,000,000 shares authorized and 17,464,505
  and 17,229,197 shares issued and outstanding                17         17
 Capital paid-in excess of par value                     196,012    192,196
 Accumulated other comprehensive loss                        (30)        (5)
 Retained earnings                                        28,994     10,479
                                                        --------   --------
   Total stockholders' equity                            224,993    202,687
                                                        --------   --------
   Total liabilities and stockholders' equity           $454,849   $437,708
                                                        ========   ========

   See accompanying notes to consolidated financial statements.

<PAGE>


                        SCHOOL SPECIALTY, INC.
                CONSOLIDATED STATEMENT OF OPERATIONS
              (In Thousands, Except Per Share Amounts)

                                                For the Fiscal Year Ended
                                             --------------------------------
                                               April 29,  April 24,  April 25,
                                                 2000       1999       1998
                                                 ----       ----       ----
                                              (53 weeks) (52 weeks) (52 weeks)

Revenues                                       $639,271   $521,704   $310,455
Cost of revenues                                406,043    341,783    202,870
                                               --------   --------   --------
   Gross profit                                 233,228    179,921    107,585
Selling, general and administrative expenses    184,586    144,659     87,846
Restructuring and strategic restructuring costs       -      5,274      3,491
                                               --------   --------   --------
   Operating income                              48,642     29,988     16,248
Other (income) expense:
 Interest expense                                13,342     12,735      5,505
 Interest income                                   (191)      (134)      (132)
 Other                                            1,856       (228)       156
                                               --------   --------   --------
Income before provision for income taxes         33,635     17,615     10,719
Provision for income taxes                       15,120      8,719      5,480
                                               --------   --------   --------
Net income                                     $ 18,515   $  8,896   $  5,239
                                               ========   ========   ========


Weighted average shares outstanding:
 Basic                                           17,429     14,690     13,284
 Diluted                                         17,480     14,840     13,547

Net income per share:
   Basic                                       $   1.06   $   0.61   $   0.40
   Diluted                                     $   1.06   $   0.60   $   0.39




   See accompanying notes to consolidated financial statements.


<PAGE>

                           SCHOOL SPECIALTY, INC.
             CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                             (In Thousands)
<TABLE>

                                              Capital                Accumulated
                                              Paid-in                    Other      Retained     Total         Total
                            Common Stock      Excess of  Divisional  Comprehensive  Earnings  Stockholders' Comprehensive
                          Shares    Dollars   Par Value    Equity    Income(Loss)   Deficit      Equity      Income(Loss)
                           <S>        <C>       <C>         <C>           <C>          <C>         <C>          <C>
Balance at April 26, 1997      -    $    -     $     -     $19,985     $     -      $  (3,656)    $ 16,329
 Issuances of U.S. Office
  Products common stock in
  conjunction with
  acquisitions                 -         -           -       3,566           -              -        3,566
 Capital contribution by
  U.S. Office Products         -         -           -      81,332           -              -       81,332
 Net income                    -         -           -           -           -          5,239        5,239    $   5,239
                            ---------------------------------------------------------------------------------------------
   Total comprehensive
    income                                                                                                        5,239
Balance at April 25, 1998      -         -           -     104,883           -          1,583      106,466
 Shares distributed in
  spin-off from U.S.
  Office Products         12,204        12     104,867    (104,883)          4              -            -            4
 Capital contribution by
  U.S. Office Products         -         -       7,217           -           -              -        7,217
 Compensation charge for
  options tendered in
  strategic restructuring      -         -         803           -           -              -          803
 Compensation expense
  from School Specialty,
  Inc. stock purchase          -         -         271           -           -              -          271
 Issuances of common
  stock in conjunction
  with acquistions           250         -       5,487           -           -              -        5,487
 Issuances of common
  stock                    4,775         5      73,551           -           -              -       73,556
 Cumulative translation
  adjustment                   -         -           -           -          (9)             -           (9)          (9)
 Net income                    -         -           -           -           -          8,896        8,896        8,896
                         ------------------------------------------------------------------------------------------------
  Total comprehensive
   income                                                                                                         8,891
Balance at April 24, 1999 17,229        17     192,196           -          (5)        10,479      202,687
 Issuances of
  common stock               151         -       2,225           -           -              -        2,225
 Issuance of common
  stock in conjunction
  with stock option
  exercises and related
  tax benefits                55          -        918           -           -              -          918
 Issuance of common
  stock in conjuction
  with acquisitions           57          -      1,178           -           -              -        1,178
 Retirement of common
  stock in connection
  with odd0lot tender
  offer                      (27)         -       (505)          -           -              -         (505)
 Cumulative translation
  adjustment                   -          -          -           -         (25)             -          (25)         (25)
 Net income                    -          -          -           -           -         18,515       18,515       18,515
                         ------------------------------------------------------------------------------------------------
     Total comprehensive
       income                                                                                                   $18,490
Balance at April 29, 2000 17,465     $   17   $196,012            -     $  (30)       $28,994     $224,993      =========
                          =================================================================================

</TABLE>

   See accompanying notes to consolidated financial statements.

<PAGE>


                SCHOOL SPECIALTY, INC.
         CONSOLIDATED STATEMENT OF CASH FLOWS
                    (In Thousands)




                                                 For the Fiscal Year Ended
                                              --------------------------------
                                              April 29,   April 24,   April 25,
                                                2000        1999        1998
                                                ----        ----        ----
                                             (53 weeks)  (52 weeks)  (52 weeks)


Cash flows from operating activities:
 Net income                                   $ 18,515     $  8,896   $  5,239
 Adjustments to reconcile net income to
   net cash provided by operating activities:
     Depreciation and amortization expense      11,839        9,604      4,561
     Deferred taxes                              5,746          468          -
     Loss on disposal/impairment of fixed
       assets and other                          2,096            -          -
     Amortization of loan fees and other           671          762         78
     Restructuring costs                             -        5,274      2,491
     Changes in current assets and liabilities
       (net of assets acquired and liabilities
       assumed in business combinations
       accounted for under the purchase method):
         Accounts receivable                       844       13,583     (3,586)
         Inventory                              (6,137)       1,374     (6,666)
         Prepaid expenses and other
           current assets                       (6,441)      (2,822)      (717)
         Accounts payable                        9,943      (12,591)     5,256
         Accrued liabilities                    (6,006)       3,075     (2,932)
                                              --------     --------   --------
             Net cash provided by
               operating activities             31,070       27,623      3,724
                                              --------     --------   --------
Cash flows from investing activities:
  Cash paid in acquisitions, net of
    cash acquired                               (1,291)    (122,337)   (95,670)
 Additions to property and equipment           (17,351)      (4,872)    (3,558)
 Investment in long term assets                 (8,704)         (27)      (514)
                                              --------     --------   --------
             Net cash used in investing
               activities                      (27,346)    (127,236)   (99,742)
                                              --------     --------   --------
Cash flows from financing activities:
  Repayment of bank debt and capital leases   (198,192)    (261,422)    (8,372)
  Proceeds from bank borrowings                186,200      355,700          -
  Proceeds from issuance of common stock         2,225       73,556          -
  Repurchase of common stock                      (505)           -          -
  Proceeds from exercise of stock options          920            -          -
  Advances from (payments to) U.S. Office
    Products                                         -      (62,699)    23,058
  Capital contribution by U.S. Office Products       -        7,217     81,332
  Capitalized loan fees                              -       (2,960)         -
                                              --------     --------   --------
             Net cash provided (used in)
               by financing activities          (9,352)     109,392     96,018
                                              --------     --------   --------
Net increase (decrease) in cash and
  cash equivalents                              (5,628)       9,779          -
Cash and cash equivalents at beginning
  of period                                      9,779            -          -
                                              --------     --------   --------
Cash and cash equivalents at end of period    $  4,151     $  9,779   $      -
                                              ========     ========   ========
Supplemental disclosures of cash flow
  information:
 Interest paid                                $ 13,215     $ 11,151   $     35
 Income taxes paid                            $ 13,255     $  5,123   $  1,148

<PAGE>

                SCHOOL SPECIALTY, INC.
   CONSOLIDATED STATEMENT OF CASH FLOWS-(Continued)
                    (In Thousands)


     The Company issued common stock and cash in
connection with certain business combinations accounted
for under the purchase method in the fiscal years ended
April 29, 2000, April 24, 1999, and April 25, 1998. The
fair values of the assets and liabilities of the
acquired companies are presented as follows:


                                                For the Fiscal Year Ended
                                            ---------------------------------
                                             April 29,  April 24,  April 25,
                                               2000       1999       1998
                                               ----       ----       ----
                                            (53 weeks) (52 weeks) (52 weeks)

Accounts receivable                         $  2,091   $ 49,645  $ 17,900
Inventories                                    1,434     30,850    18,180
Prepaid expenses and other current assets         65     11,142     2,431
Property and equipment                           178     21,033     6,379
Intangible assets                              2,214    103,455    80,359
Other assets                                      13      3,775       346
Short-term debt                                    -       (832)   (1,850)
Accounts payable                              (1,881)   (25,853)   (9,400)
Accrued liabilities                             (759)    (7,564)   (9,089)
Long-term debt                                  (885)   (57,599)   (6,020)
Other liabilities                                  -       (228)        -
                                            --------   --------  --------
   Net assets acquired                      $  2,470   $127,824  $ 99,236
                                            ========   ========  ========
The acquisitions were funded as follows:
Common stock                                $  1,178   $  5,487  $      -
U.S. Office Products common stock                  -          -     3,566
Cash paid, net of cash acquired                1,292    122,337    95,670
                                            --------   --------  --------
   Total                                    $  2,470   $127,824  $ 99,236
                                            ========   ========  ========




   See accompanying notes to consolidated financial statements.

<PAGE>

NOTE 1-BACKGROUND

     School Specialty, Inc. (the "Company") is a
Delaware corporation which was a wholly-owned
subsidiary of U.S. Office Products Company ("U.S.
Office Products") until June 9, 1998.  On June 9, 1998,
U.S. Office Products spun-off its Educational Supplies
and Products Division (the "Education Division") as an
independent publicly owned company. This transaction
was  effected through the distribution of shares of the
Company to U.S. Office Products' shareholders (the
"Distribution"). Prior to the Distribution, U.S. Office
Products contributed its equity interests in certain
wholly-owned subsidiaries associated with the Education
Division to the Company. U.S. Office Products and the
Company entered into a number of agreements to
facilitate the Distribution and the transition of the
Company to an independent business enterprise.
Additionally, concurrently with the Distribution, the
Company sold 2,125 shares in an initial public offering
(the "IPO").  Following the IPO, management purchased
250 shares.

NOTE 2-BASIS OF PRESENTATION

     The accompanying consolidated financial statements
and related notes to consolidated financial statements
include the accounts of School Specialty, Inc. and the
companies acquired in business combinations accounted
for under the purchase method from their respective
dates of acquisition and give retroactive effect to the
results of the pooled companies for all periods
presented.  For the periods prior to the Distribution,
the consolidated financial statements reflect the
assets, liabilities, divisional equity, revenues and
expenses that were directly related to the Company as
it was operated within U.S. Office Products. In cases
involving assets and liabilities not specifically
identifiable to any particular business of U.S. Office
Products, only those assets and liabilities that were
transferred to the Company were included in the
Company's separate consolidated balance sheet. The
Company's consolidated statement of income includes all
of the related costs of doing business, including an
allocation of certain general corporate expenses of
U.S. Office Products which were not directly related to
these businesses including certain corporate
executives' salaries, accounting and legal fees,
departmental costs for accounting, finance, legal,
purchasing, marketing, and human resources as well as
other general overhead costs. These allocations were
based on a variety of factors, dependent upon the
nature of the costs being allocated, including
revenues, number and size of acquisitions and number of
employees. Management believes these allocations were
made on a reasonable basis.

     The consolidated statement of income does not
include an allocation of interest expense on all debt
allocated to the Company. See Note 9 for further
discussion of interest expense.

NOTE 3-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 and the 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.

<PAGE>

Definition of Fiscal Year

     As used in these consolidated financial statements
and related notes to consolidated financial statements,
"fiscal 2000", "fiscal 1999" and "fiscal 1998" refer to
the Company's fiscal years ended April 29, 2000 (53
weeks), April 24, 1999 (52 weeks), and April 25, 1998
(52 weeks), respectively.

Principles of Consolidation

     The consolidated financial statements include the
accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany transactions
and accounts are eliminated in consolidation.

Cash and Cash Equivalents

     The Company considers temporary cash investments
with original maturities of three months or less from
the date of purchase to be cash equivalents.

Concentration of Credit Risk

     Financial instruments which potentially subject
the Company to concentrations of credit risk consist
primarily of trade accounts receivable.  Receivables
arising from sales to customers are not collateralized
and, as a result, management continually monitors the
financial condition of its customers to reduce the risk
of loss.

Inventories

     Inventories are stated at the lower of cost or
market with cost determined on a first-in, first-out
(FIFO) basis and consist primarily of products held for
sale.

Property and Equipment

     Property and equipment is stated at cost.
Additions and improvements are capitalized. Maintenance
and repairs are expensed as incurred. Depreciation of
property and equipment is calculated using the
straight-line method over the estimated useful lives of
the respective assets. The estimated useful lives range
from twenty-five to forty years for buildings and its
components and three to fifteen years for furniture,
fixtures and equipment. Property and equipment leased
under capital leases is being amortized over the lesser
of its useful life or its lease terms.

Intangible Assets

     Intangible assets consist primarily of goodwill,
which represents the excess of cost over the fair value
of net assets acquired in business combinations
accounted for under the purchase method and non-compete
agreements. Substantially all goodwill is amortized on
a straight line basis over an estimated useful life of
forty years, except for goodwill associated with a
software subsidiary which is being amortized over
fifteen years. Identifiable intangible assets include
trademarks, capitalized technology, and franchise
agreements which are being amortized over their
estimated useful lives ranging from one to forty years.

     Management periodically evaluates the
recoverability of goodwill, which would be adjusted for
a permanent decline in value, if any, by comparing
anticipated undiscounted future cash flows from
operations to net book value.  If the operation is
determined to be unable to recover the carrying amount
of its assets, then intangible

<PAGE>

assets are written down first, followed by the other
long-lived assets of the operation, to fair value.  Fair
value is determined based on discounted cash flows or appraised
values, depending upon the nature of the assets.  Based upon
its most recent assessment, the Company does not
believe an impairment of long-lived assets exists at
April 29, 2000.


Cost Investment


     The Company uses the cost method to account for
its investment in a less than 20%-held entity. Under
this method, the Company's investment is stated at cost
and is periodically evaluated to determine if a write
down of the investment is needed in order to properly
state the investment at the lower of cost or market. In
connection with this evaluation, the Company took a
$1,500 charge during the fourth quarter of fiscal 2000.

Fair Value of Financial Instruments

     The carrying amounts of the Company's financial
instruments including cash and cash equivalents,
accounts receivable, accounts payable, equity
securities and long-term debt approximate fair value.

Income Taxes

     Income taxes, during the period subsequent to the
Distribution, have been computed utilizing the asset
and liability approach which requires the recognition
of deferred tax assets and liabilities for the tax
consequences of temporary differences by applying
enacted statutory tax rates applicable to future years
to differences between the financial statement carrying
amounts and the tax basis of existing assets and
liabilities.

     As a division of U.S. Office Products, the Company
did not file separate federal income tax returns but
rather was included in the federal income tax returns
filed by U.S. Office Products and its subsidiaries from
the respective dates that the entities within the
Company were acquired by U.S. Office Products. For
purposes of the consolidated financial statements, the
Company's allocated share of U.S. Office Products'
income tax provision was based on the "separate return"
method. Certain companies acquired in
pooling-of-interests transactions elected to be taxed
as Subchapter S corporations and, accordingly, no
federal income taxes were recorded by those companies
for periods prior to their acquisition by U.S. Office
Products.

Revenue Recognition

     Revenue is recognized upon the delivery of
products or upon the completion of services provided to
customers as no additional obligations to the customers
exist. Returns of the Company's product are considered
immaterial.

Cost of Revenues

     Vendor rebates are recorded as a reduction in the
cost of inventory and recognized as a reduction in cost
of revenues when such inventory is sold.

Advertising Costs

     The Company expenses advertising costs when the
advertisement occurs. Advertising costs are included in
the consolidated statement of income as a component of
selling, general and administrative expenses.

<PAGE>

Deferred Catalog Costs

     Deferred catalog costs are amortized in amounts
proportionate to revenues over the life of the catalog,
which is typically one to two years. Amortization
expense related to deferred catalog costs is included
in the consolidated statement of income as a component
of selling, general and administrative expenses. Such
amortization expense for the year ended April 29, 2000,
April 24, 1999, and April 25, 1998 was $16,076,
$12,146, and $6,934, respectively.

Research and Development Costs

     Research and development costs are charged to
operations in the year incurred.  Research and
development costs are included in the consolidated
statement of income as a component of selling, general
and administrative expenses.

Internally Developed Software

     During fiscal 1999 the Company adopted the
American Institute of Certified Public Accountants
("AICPA")  Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained
for Internal Use" ("SOP 98-1").  SOP 98-1 requires
computer software costs associated with internal use
software to be expensed as incurred until certain
capitalization criteria are met.

Restructuring Costs

     The Company records the costs of consolidating
existing Company facilities into acquired operations,
including the external costs and liabilities to close
redundant Company facilities and severance and
relocation costs related to the Company's employees in
accordance with Emerging Issues Task Force ("EITF")
Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in
Restructuring)".

New Accounting Pronouncements

     In June 1998, the Financial Accounting
Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133
"Accounting for Derivative Instruments and
Hedging Activities."  SFAS No. 137, which
delays the adoption date of SFAS No. 133 and
was issued in July, 1999, requires adoption
of SFAS No. 133 for annual periods beginning
after June 15, 2000.  SFAS No. 133
establishes standards for recognition and
measurement of derivatives and hedging
activities.  The Company will implement this
statement in fiscal year 2002 as required.
The adoption of SFAS No. 133 is not expected
to have a material effect on the Company's
financial position or results of operations.

     The SEC issued Staff Accounting Bulletin No.
101, "Revenue Recognition" ("SAB No. 101"),
in December 1999, which provides guidance on
the recognition, presentation, and disclosure
of revenue in financial statements.  On June
26, 2000, the SEC issued SAB No. 101B which
delayed implementation of SAB No. 101.  The
Company will implement SAB No. 101 in the
fourth quarter of fiscal year 2001 as
required by SAB No. 101B.  The Company is
reviewing the requirements of SAB No. 101 and
has not yet determined the impact of this
standard on its consolidated financial
statements.  It is not expected, however,
that SAB No. 101 will have a material effect
on the Company's financial position or
results of operations.

<PAGE>

Distribution Ratio

     On June 9, 1998, the Company issued approximately
12,204 shares of its common stock to U.S. Office
Products, which then distributed such shares to its
shareholders in the ratio of one share of Company
common stock for every nine shares of U.S. Office
Products common stock held by each shareholder. The
share data reflected in the accompanying financial
statements for the periods prior to the Distribution
represents the historical share data for U.S. Office
Products for the period or as of the date indicated,
retroactively adjusted to give effect to the one for
nine distribution ratio.

Reclassifications

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

NOTE 4-BUSINESS COMBINATIONS

     In fiscal 2000, the Company acquired 100% of a
company, which was accounted for under the purchase
method of accounting, for an aggregate purchase price
of $2,353, consisting of $1,175 of cash and 57 shares
of common stock with a market value of $1,178,
resulting in goodwill of $1,934, which will be
amortized over 40 years.  During fiscal 2000, the
Company also purchased certain assets which represented
a portion of another existing business for $117.  This
transaction resulted in goodwill of $280.  The results
of these acquisitions have been included in the
Company's results from their dates of acquisition.  The
pro-forma results of the later transaction are not
included in the table below due to immateriality.

     In fiscal 1999, the Company made five acquisitions
accounted for under the purchase method of accounting
for an aggregate purchase price of $127,824, consisting
of $122,337 of cash and 250 shares of common stock with
a market value of $5,487. The total assets related to
these five acquisitions were $219,900, including
goodwill of $103,455. The results of these acquisitions
have been included in the Company's results from their
respective dates of acquisition.

     In fiscal 1998, the Company made eight
acquisitions accounted for under the purchase method of
accounting for an aggregate purchase price of $99,236,
consisting of $95,670 of cash and U.S. Office Products
common stock with a market value of $3,566. The total
assets related to these eight acquisitions were
$125,595, including goodwill of $80,359. The results of
these acquisitions have been included in the Company's
results from their respective dates of acquisition.

     The following presents the unaudited pro forma
results of operations of the Company for the fiscal
years ended April 29, 2000, and April 24, 1999, and
includes the Company's historical consolidated results
of operations and the results of the companies acquired
in fiscal 2000 and fiscal 1999 as if all such purchase
acquisitions had been made at the beginning of fiscal
1999. The results presented below include certain pro
forma adjustments to reflect the amortization of
intangible assets and the inclusion of a federal income
tax provision on all earnings:

<PAGE>

                                             For the Fiscal Year Ended
                                           -----------------------------
                                           April 29,           April 24,
                                             2000                1999
                                             ----                ----
                                          (53 weeks)           (52 weeks)

      Revenues                             $639,271             $632,380
      Net income                             18,236                9,347

      Net income per share:
        Basic                              $   1.05             $  0.62
        Diluted                            $   1.05             $  0.62

     The unaudited pro forma results of operations are
prepared for comparative purposes only and do not
necessarily reflect the results that would have
occurred had the acquisitions occurred at the beginning
of fiscal 1999 or the results which may occur in the
future.

NOTE 5-RESTRUCTURING COSTS

     During the fourth quarter of fiscal 1998, the
Company incurred restructuring costs of $2,491 to close
redundant facilities and severance costs.  This
restructuring plan was completed by the end of fiscal
1999.  The Company also incurred a strategic
restructuring charge during the fourth quarter of
fiscal 1998 of $1,000.  This represented the
transaction costs allocated to the Company under the
distribution agreement entered into with U.S. Office
Products and the other spin-off companies.

     During the first quarter of fiscal 1999, the
Company incurred a strategic restructuring charge of
$1,074.  This non-cash charge related to compensation
expense attributed to the U.S. Office Product's stock
option tender offer and sale of shares of Common Stock
to some of the Company's executive management
personnel.  During the second quarter of fiscal 1999,
the Company incurred restructuring costs of $4,200 to
consolidate existing warehousing, customer service and
sales operations.  During the fiscal years ended April
29, 2000, and April 24,1999, the Company terminated 43
and 152 employees, respectively, under this plan.

     Selected information related to the restructuring
reserve for closing redundant facilities and
consolidating existing warehousing, customer service
and sales operations follows:


                                   Facility     Severance   Other Asset
                                 Closure and       and      Write-downs
                                Consolidation  Terminations  and Costs   Total
                                -------------  ------------  ----------  -----
Balance at April 26, 1997         $    -         $    -        $  151    $  151
 Additions                           728            214         1,549     2,491
 Utilizations                       (728)             -        (1,442)   (2,170)
                                  -------        -------       -------   -------
Balance at April 25, 1998              -            214           258       472
 Additions                         1,300          2,100           800     4,200
 Utilizations                       (199)        (1,029)         (692)   (1,920)
                                  -------        -------       -------   -------
Balance at April 24, 1999         $1,101         $1,285        $  366    $2,752
 Additions                             -              -             -         -
 Utilizations                     (1,084)        (1,245)         (358)   (2,687)
                                  -------        -------       -------   -------
Balance at April 29, 2000         $   17         $   40        $    8    $   65
                                  =======        =======       =======   =======

<PAGE>

NOTE 6-PREPAID EXPENSES AND OTHER CURRENT ASSETS

     Prepaid expenses and other current assets consist of the following:

                                              April 29,        April 24,
                                                2000              1999
                                                ----              ----
Deferred catalog costs                        $ 14,742         $ 13,203
Assets held for sale                             4,333                -
Other                                            9,589            4,129
   Total prepaid expenses and                 --------         --------
    other current assets                      $ 28,664         $ 17,332
                                              ========         ========

     Deferred catalog costs represent costs which have
been paid to produce Company catalogs which will be
used in future periods.  These deferred catalog costs
will be expensed in the periods the catalogs are used.

NOTE 7-PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

                                              April 29,       April 24,
                                                2000             1999
                                                ----             ----
Land                                         $  2,540          $  1,921
Projects in progress                            2,954             1,607
Buildings and leasehold improvements           26,635            28,392
Furniture, fixtures, and other                 17,848            12,283
Machinery and warehouse equipment              14,660            10,053
                                             ---------        ----------
                                               64,637            54,256
                                             ---------        ----------
Less: Accumulated depreciation                (12,912)          (11,951)
                                             ---------         ---------
  Net property and equipment                 $ 51,725          $ 42,305
                                             =========         =========

     Depreciation expense for the fiscal years ended
April 29, 2000 (53 weeks), April 24, 1999 (52 weeks),
and April 25, 1998 (52 weeks) was $5,523, $4,948, and
$2,500, respectively.

NOTE 8-INTANGIBLE ASSETS

     Intangible assets consist of the following:

                                              April 29,       April 24,
                                                2000            1999
                                                ----            ----
Goodwill                                      $194,350        $195,060
Other                                           13,148          13,037
                                              ---------       ---------
                                               207,498         208,097
Less: Accumulated amortization                 (14,754)         (9,387)
                                              ---------       ---------
   Net intangible assets                      $192,744        $198,710
                                              =========       =========

     Amortization expense for the fiscal years ended
April 29, 2000 (53 weeks), April 24, 1999 (52 weeks),
and April 25, 1998 (52 weeks) was $6,316, $4,656, and
$2,061, respectively.

<PAGE>

NOTE 9-CREDIT FACILITIES

Long-Term Debt
     Long-term debt consists of the following:
                                              April 29,       April 24,
                                                2000            1999
                                                ----            ----
Credit facility                               $161,850        $172,500
Capital lease obligations                          182             785
Other debt                                         148               -
                                              ---------       ---------
                                               162,180         173,285
Less: Current maturities                       (17,391)        (11,594)
                                              ---------       ---------
   Total long-term debt                       $144,789        $161,691
                                              =========       =========

     On September 30, 1998, the Company entered into a
five year secured $350,000 credit facility (the "credit
facility") with a syndicate of financial institutions,
led by Bank of America, N.A. as Agent, consisting of a
$250,000 revolving loan and a $100,000 term loan.
Interest on borrowings under the credit facility
accrued through the third quarter of fiscal 1999 at a
rate of, at the Company's option, either (i) LIBOR plus
2.375% or (ii) the lender's base rate plus a margin of
0.75%, plus a fee of 0.475% on the unborrowed amount
under the revolving term loan.  Subsequent to the third
quarter of fiscal 1999, interest accrues at a rate of,
at the Company's option, either (i) LIBOR plus an
applicable margin of up to 2.000%, or (ii) the lender's
base rate plus an applicable margin of up to 0.750%,
plus a fee of up to 0.475% on the unborrowed amount
under the revolving loan.  The credit facility is
secured by substantially all of the assets of the
Company and contains terms and covenants typical of
facilities of such size.  The Company was in compliance
with these covenants at April 29, 2000.  At April 29,
2000, the balance outstanding under the credit facility
was $161,850, including $75,600  and  $86,250
outstanding under the revolving and term loans,
respectively, and included seven eurodollar contracts,
expiring within 89 days, totaling $151,250 at an
average interest rate of 7.47% .  The effective
interest rate under the credit facility for fiscal 2000
was 7.89%, which includes the loan origination fee and
commitment fee on unborrowed funds, and excludes the
effect of the interest rate swap agreement disclosed
below.

     To manage interest rate risk, the Company entered
into an interest rate swap agreement on October 28,
1998, with the Bank of New York covering $50,000 of the
outstanding borrowings under the credit facility.  The
agreement fixes the 30 day LIBOR interest rate at 4.37%
per annum on the $50,000 notional amount and has a
three year term that may be canceled by the Bank of New
York on the second anniversary.  The floating LIBOR
interest rate at April 29, 2000, was 6.18% and 4.91% at
April 29. 2000, and April 24, 1999, respectively. The
fair market value of the swap agreement was $566 at
April 29, 2000.

Maturities of Long-Term Debt

      Maturities  on long-term debt, including  capital
lease obligations, are as follows:

          2001                                  $ 17,391
          2002                                    18,208
          2003                                    29,082
          2004                                    97,405
          2005                                        16
          Thereafter                                  78
                                                --------
            Total maturities of long-term debt  $162,180
                                                ========

<PAGE>

     The credit facility contains certain restrictive
covenants, including limitations on the ability of the
Company to pay dividends or redeem stock well as
limitations on incurring debt, capital expenditures,
mergers or consolidations, sale of assets and
transactions with affiliates.

Payable to U.S. Office Products

     On June 9, 1998, per the distribution agreement,
the Company borrowed $83,300 from its line of credit to
repay the remaining amounts due to U.S. Office
Products. The average outstanding long-term payable to
U.S. Office Products during the fiscal year ended April
24, 1999, was $6,871.

     Interest was allocated to the Company by U.S.
Office Products based upon the Company's average
outstanding payable (short-term and long-term) balance
with U.S. Office Products at U.S. Office Products'
weighted average interest rate during such period. The
Company's financial statements include allocations of
interest expense from U.S. Office Products totaling
$158 and $5,414 during the fiscal years ended April 24,
1999, and April 25, 1998, respectively.

NOTE 10-INCOME TAXES

     The provision for income taxes consists of:

                                           For the Fiscal Year Ended
                                     April 29,     April 24,    April 25,
                                       2000          1999         1998
                                    (53 weeks)    (52 weeks)   (52 weeks)
Income taxes currently payable:
 Federal                              $ 7,371      $ 6,511       $ 3,646
 State                                  2,003        1,740           907
                                      -------      -------       -------
                                        9,374        8,251         4,553
Deferred income tax expense             5,746          468           927
                                      -------      -------       -------
   Total provision for income taxes   $15,120      $ 8,719       $ 5,480
                                      =======      =======       =======

<PAGE>

Deferred taxes are comprised of the following:

                                                      April 29,  April 24,
                                                        2000       1999
Current deferred tax assets:
 Inventory                                            $ 3,001    $ 4,008
Allowance for doubtful accounts                           716        858
 Net operating loss carryforward                        1,493      1,574
 Accrued liabilities                                      620        820
 Accrued restructuring                                     26      1,111
 Charitable contribution carryforward                   1,108          -
                                                      -------    -------
   Total current deferred tax assets                    6,964      8,371
                                                      -------    -------
Long-term deferred tax assets (liabilities):
Net operating loss carryforward                         4,097      4,694
Property and equipment                                 (1,200)      (476)
Intangible assets                                      (1,636)      (408)
Unrealized loss on investment                             600          -
                                                      -------    -------
   Total long-term deferred tax assets (liabilities)    1,861      3,810
                                                      -------    -------
   Net deferred tax assets                            $ 8,825    $12,181
                                                      =======    =======

     The Company has net operating loss carryforwards
of approximately $14,710, on a consolidated basis,
which expire during fiscal years 2011-2013.  The
carryforwards are also subject to an annual limitation
on utilization pursuant to IRS Code Section 382 of
approximately $3,900.

      The  Company's effective income tax  rate  varied
from the U.S. federal statutory tax rate as follows:

                                         For the Fiscal Year Ended
                                      -------------------------------
                                      April 29,  April 24,   April 25,
                                        2000       1999        1998
                                        ----       ----        ----
                                     (53 weeks) (52 weeks)   (52 weeks)

U.S. federal statutory rate              35.0%     35.0%         34.0%
State income taxes, net of federal
 income tax benefit                       4.6       5.2           6.6
Non-deductible goodwill                   5.4       6.5           6.0
Non-deductible acquisition costs            -         -           3.3
Other                                       -       2.8           1.2
                                        ------    ------       -------
Effective income tax rate                45.0%     49.5%         51.1%
                                        ======    ======       =======

<PAGE>

NOTE 11-OPERATING LEASE COMMITMENTS


     The Company leases various types of retail,
warehouse and office facilities and equipment,
furniture and fixtures under noncancelable lease
agreements which expire at various dates. Future
minimum lease payments under noncancelable operating
leases are as follows:


     2001                                          $ 4,483
     2002                                            4,236
     2003                                            3,358
     2004                                            2,217
     2005                                            1,754
     Thereafter                                      1,670
                                                   -------
       Total minimum lease payments                $17,718
                                                   =======

     Rent expense for the fiscal years ended April 29,
2000 (53 weeks), April 24, 1999 (52 weeks), and April
25, 1998 (52 weeks), was $5,535, $4,498, and $3,389,
respectively.

NOTE 12-COMMITMENTS AND CONTINGENCIES

Litigation

     Under the terms of the agreement entered into
between the Company and U.S. Office Products in
connection with a strategic restructuring plan, the
Company is obligated, subject to a maximum obligation
of $1.75 million, to indemnify U.S. Office Products for
certain liabilities incurred by U.S. Office Products
prior to the Distribution, including liabilities under
federal securities laws (the "Indemnification
Obligation").  This Indemnification Obligation is
reduced by any insurance proceeds actually recovered
with respect to the Indemnification Obligation and is
shared on a pro rata basis with the other three
divisions of U.S. Office Products which were spun-off
from U.S. Office Products in connection with the U.S.
Office Products comprehensive restructuring.

     U.S. Office Products has been named a defendant in
various class action lawsuits.  These lawsuits
generally allege violations of federal securities laws
by U.S. Office Products and other named defendants
during the months preceding the Strategic Restructuring
Plan. The Company has not received any notice or claim
from U.S. Office Products alleging that these lawsuits
are within the scope of the Indemnification Obligation,
but the Company believes that certain liabilities and
costs associated with these lawsuits (up to a maximum
of $1.75 million) are likely to be subject to the
Company's Indemnification Obligation.  Nevertheless,
the Company does not presently anticipate that the
Indemnification Obligation will have a material adverse
effect on the Company. Thus, due to the preliminary
nature of this action, it is not possible at this time
to assess the outcome of the claims.  In accordance
with SFAS No. 5, "Accounting for Contingencies", no
provision has been recorded in the accompanying
financial statements.

     The Company is, from time to time, a party to
litigation arising in the normal course of its
business.  Management believes that none of this
litigation will have a material adverse effect on the
financial position, results of operations or cash flows
of the Company.

<PAGE>

Postemployment Benefits

     The Company has entered into employment agreements
with several employees that would result in payments to
these employees upon a change of control or certain
other events. No amounts have been accrued at April 29,
2000, April 24, 1999 or April 25, 1998 related to these
agreements, as no change of control has occurred.

Distribution

     At the date of the Distribution, School Specialty,
U.S. Office Products and the other spin-off companies
entered into a distribution agreement, tax allocation
agreement, and an employee benefits agreement.  The
spin-off companies entered into a tax indemnification
agreement and may enter into other agreements,
including agreements relating to referral of customers
to one another.  These agreements provide, among other
things, for U.S. Office Products and School Specialty
to indemnify each other from tax and other liabilities
relating to their respective businesses prior to and
following the Distribution. Certain of the obligations
of School Specialty and the other spin-off companies to
indemnify U.S. Office Products are jointly and
severally. Therefore, if one of the other spin-off
companies fails to satisfy its indemnification
obligations to U.S. Office Products when such a loss
occurs, School Specialty may be required to reimburse
U.S. Office Products for all or a portion of the losses
that otherwise would have been allocated to other
spin-off companies. In addition, the agreements
allocate liabilities, including general corporate and
securities liabilities of U.S. Office Products not
specifically related to the school supplies business,
between U.S. Office Products and the Company and the
other spin-off companies. The terms of the agreements
that will govern the relationship between School
Specialty and U.S. Office Products were established by
U.S. Office Products in consultation with School
Specialty's management prior to the Distribution while
School Specialty was a wholly-owned subsidiary of U.S.
Office Products.

NOTE 13-EMPLOYEE BENEFIT PLANS

     On June 9, 1998, the Company implemented the
School Specialty, Inc. 401(k) Plan (the "Company 401(k)
Plan") which allows employee contributions in
accordance with Section 401(k) of the Internal Revenue
Code.  The Company matches a portion of employee
contributions and all full-time employees are eligible
to participate in the Company 401(k) Plan after 90 days
of service.  In fiscal 2000 and fiscal 1999 the
Company's matching contribution expense was $564 and
$416, respectively. Prior to June 9, 1998 the Company
participated in the U.S. Office Products 401(k)
Retirement Plan (the "401(k) Plan"), which was similar
to the plan adopted by the Company.

     Certain subsidiaries of the Company had, prior to
implementation of the Company 401(k) Plan, qualified
defined contribution benefit plans, which allow for
voluntary pre-tax contributions by the employees. The
subsidiaries paid all general and administrative
expenses of the plans and in some cases made matching
contributions on behalf of the employees.

NOTE 14-STOCKHOLDERS' EQUITY

Earnings Per Share

     Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the
weighted average number of common shares outstanding
for the period.  Diluted EPS reflects the potential
dilution that could occur if securities or other
contracts to issue common stock were exercised or
converted into

<PAGE>

common stock. The following information
presents the Company's computations of basic and
diluted EPS for the periods presented in the
consolidated statement of income.


                                             Income       Shares      Per Share
                                           (Numerator) (Denominator)   Amount
Fiscal 2000 (53 weeks):                    ----------- -------------  -------
 Basic EPS                                   $18,515       17,429      $ 1.06
 Effect of dilutive employee stock options         -           51      ======
                                             -------       ------
 Diluted EPS                                 $18,515       17,480      $ 1.06
                                             =======       ======      ======
Fiscal 1999 (52 weeks):
 Basic EPS                                   $ 8,896       14,690      $ 0.61
 Effect of dilutive employee stock options         -          150      ======
                                             -------      -------
 Diluted EPS                                 $ 8,896       14,840      $ 0.60
                                             =======      =======      ======
Fiscal 1998 (52 weeks):
 Basic EPS                                   $ 5,239       13,284      $ 0.40
 Effect of dilutive employee stock options         -          263      ======
                                             -------      -------
 Diluted EPS                                 $ 5,239       13,547      $ 0.39
                                             =======      =======      =======


     The Company had additional employee stock options
outstanding during the periods presented that were not
included in the computation of diluted EPS because they
were anti-dilutive.

Capital Contribution by U.S. Office Products

     During fiscal 1999 and fiscal 1998, U.S. Office
Products contributed $7,217 and $81,332, respectively,
of capital to the Company. The contribution reflects
the forgiveness of intercompany debt by U.S. Office
Products, as it was agreed that the Company would be
allocated only $80,000 of debt plus the amount of any
additional debt incurred after January 12, 1998, in
connection with the acquisition of entities that became
subsidiaries of the Company.  The total debt allocated
to the Company at the time of the Distribution was
$83,300.

Stock Offerings

     On June 9, 1998, the Company issued 2,125 shares
in conjunction with its IPO.  In an offering concurrent
with the IPO, management acquired 250 shares.  The
total net proceeds to the Company from the offerings
was $32,736.

     On April 16, 1999, the Company issued 2,400 shares
in conjunction with a secondary public offering
receiving net proceeds of $40,820. On May 17, 1999, the
underwriters of the Company's secondary offering
exercised their over allotment option for 151 shares of
Company stock at $17.25 per share for net proceeds of
$2,225.

Employee Stock Plans

     On June 10, 1998, the Board of Directors
approved the School Specialty, Inc. 1998
Stock Incentive Plan (the "Plan").  The
purpose of the Plan is to provide officers,
key employees and consultants with additional
incentives by increasing their ownership
interests in the Company.  The maximum number
of options available for grant under the
Plan, is equal to 20% of the Company's
outstanding common stock.  The

<PAGE>

maximum number of options available for grant in any
fiscal year under the Plan is 1,200 shares. Prior to
the approval of the Plan, the Company had
stock options outstanding under the U.S.
Office Products 1994 Long-Term Compensation
Plan. The Company replaced the options to
purchase shares of common stock of U.S.
Office Products held by employees with
options issued under the Plan to purchase
shares of common stock of the Company. In
order to keep the option holders in the same
economic position immediately before and
after the Distribution, the number of U.S.
Office Products options held by Company
personnel was multiplied by 0.903 and the
exercise price of those options was divided
by 0.903 for purposes of the replacement
options. The vesting provisions and option
period of the original grants were not
changed. All option data reflected below has
been retroactively restated to reflect the
effects of the Distribution.

  The Company accounts for options issued in
accordance with APB Opinion No. 25. Accordingly,
because the exercise prices of the options equal the
market price on the date of grant, no compensation
expense has been recognized for the options granted.
Had compensation cost for the Company's stock options
been recognized based upon the fair value of the stock
options on the grant date under the methodology
prescribed by SFAS No. 123 "Accounting for Stock Based
Compensation", the Company's net income and net income
per share would have been impacted as indicated in the
following table.

                                                For the Fiscal Year Ended
                                            ---------------------------------
                                            April 29,   April 24,   April 25,
                                              2000        1999        1998
                                              ----        ----        ----
                                           (53 weeks)  (52 weeks)  (52 weeks)
       Net income (loss):
         As reported                        $18,515     $ 8,896      $ 5,239
         Pro forma                           14,954      (1,737)       4,436

       Net income (loss) per share:
         As reported:
          Basic                             $  1.06     $  0.61      $  0.40
          Diluted                           $  1.06     $  0.60      $  0.39

         Pro forma:
          Basic                             $  0.86     $ (0.12)     $  0.33
          Diluted                           $  0.86     $ (0.12)     $  0.33


       The fair value of options granted (which is amortized to
expense over the option vesting period in determining the pro
forma impact) is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted
average assumptions:

                                                 For the Fiscal Year Ended
                                              -------------------------------
                                              April 29,  April 25,  April 24,
                                                2000       1999       1998
                                                ----       ----       ----
     Expected life of option                  7 years     7 years    7 years
     Risk free interest rate                    6.49%       5.50%      6.35%
     Expected volatility of stock              67.14%      59.00%     44.10%

  The weighted-average fair value of options granted
was $11.45, $10.23, and $9.75 for fiscal 2000, 1999,
and 1998, respectively.

<PAGE>

  A summary of option transactions follows:

                                      Options Outstanding  Options Exercisable
                                      -------------------  -------------------
                                                Weighted-            Weighted-
                                                Average              Average
                                                Exercise             Exercise
                                      Options    Price      Options   Price
                                      -------    -----      -------   ------
 Balance at April 26, 1997              211      $26.93
     Granted                            257       18.01
     Canceled                           (26)      25.45
                                     -------
 Balance at April 25, 1998              442       21.83        46      $27.14

     Granted                          2,031       15.86
     Exercised                          (82)      20.62
     Canceled                           (25)      26.49
                                      ------
 Balance at April 24, 1999            2,366      $16.70       118      $23.39

     Granted                            803       16.23
     Exercised                          (55)      16.21
     Canceled                           (50)      20.20
                                      ------
 Balance at April 29, 2000            3,064      $16.53     1,973     $16.20
                                      ======

  The following table summarizes information about
  stock options outstanding at April 29, 2000:


                                 Options Outstanding        Options Exercisable
                             ---------------------------   -------------------
                                               Weighted-              Weighted-
                                     Weighted-  Average               Average
                                      Average   Exercise              Exercise
  Range of Exercise Prices   Options   Life      Price       Options   Price
  ------------------------   -------   ----      -----       -------   ------
  $12.00 - $15.00              325     9.14     $14.48          --        --
  $15.50 - $15.50            1,748     8.11      15.50       1,724    $15.50
  $15.63 - $19.93              798     9.01      17.51         145     17.33
  $21.78 - $29.43              193     7.13      25.26         104     26.34
                            ------     ----     ------       -----    ------
                             3,064     8.40     $16.53       1,973    $16.20
                            ======     ====     ======       =====    ======

     Options granted are generally exercisable beginning one
year from the date of grant in cumulative yearly amounts of
25% of the shares under option and generally expire ten
years from the date of grant.  Options granted to directors
and non-employee officers of the Company vest over a three
year period, 20% after the first year, 50% (cumulative) after
year two and 100% (cumulative) after the third year.

     As of the date of Distribution, Jonathan J.
Ledecky, a member of the Company's Board of Directors
and formerly the Chairman and Chief Executive Officer
of U.S. Office Products, received 914,079 shares under
an option grant with an exercise price of $15.50.  This
grant represented 7.5% of the outstanding Company stock
as of the date of Distribution. The options were
exercisable in full on June 10, 1999.

<PAGE>

  Immediately following the effective date of the
registration statements filed in connection with the
IPO and the Distribution, the Company's Board of
Directors granted 850,083 options, covering 7% of the
outstanding shares of the Company's common stock, to
certain executive management personnel (excluding the
7.5% granted to Mr. Ledecky). The options granted were
granted under the Plan and have a per share exercise of
$15.50 and were exercisable in full on June 10, 1999.

  Total options available for grant under the Plan are
equal to 20% of the outstanding shares of the Company's
common stock.


NOTE 15-SEGMENT INFORMATION

     During the third quarter of fiscal 2000, the
Company modified its segment reporting by identifying
information for a third business segment, the Internet
business segment.  This segment includes business
generated by products supplied through the Internet and
products supplied for use with the Internet.  Effective
October 24, 1999, the Company began to separately track
financial information for this segment, and assign
certain management personnel the responsibility for
monitoring this information and focusing on the
expansion of the Company's Internet business.  The
Company is unable to segregate information for the
Internet business segment for fiscal 1998, 1999, and
the first two quarters of fiscal 2000; therefore,
results for this segment prior to the third and fourth
quarters of fiscal 2000 are included in both the
Traditional and Specialty business segments.

     The Company's business activities are organized
around three principal business segments, Traditional,
Specialty and Internet.  Both internal and external
reporting conform to this organizational structure,
with no significant differences in accounting policies
applied.  The Company evaluates the performance of its
segments and allocates resources to them based on
revenue growth and profitability.  While the three
segments serve a similar customer base, notable
differences exist in products, gross margin and revenue
growth rate.  Products supplied within the Traditional
segment include consumables (consisting of classroom
supplies, instructional materials, educational games,
art supplies and school forms), school furniture and
indoor and outdoor equipment.  Products supplied within
the Specialty segment target specific educational
disciplines, such as art, industrial arts, physical
education, sciences, library and early childhood.  The
Internet segment supplies products from both the
Traditional and Specialty segments through the
Internet.  In addition, the Internet segment includes
products supplied for customer use with the  Internet
(i.e., filtering software for the Internet).

<PAGE>

     The following table presents segment information.

                                                 For the Fiscal Year Ended
                                              -------------------------------
                                              April 29,  April 24,  April 28,
                                                2000       1999       1998
                                                ----       ----       ----
                                             (53 weeks) (52 weeks) (52 weeks)
Revenues:
 Traditional                                  $386,715   $339,031   $201,770
 Specialty                                     252,556    182,673    108,685
 Internet                                        5,607          -          -
 Inter-company revenue elimination              (5,607)         -          -
                                              --------   --------   --------
   Total                                      $639,271   $521,704   $310,455
                                              ========   ========   ========
Operating profit (loss) and income before
  taxes: (a)
 Traditional                                  $ 34,653   $ 21,222   $ 10,348
 Specialty                                      28,573     20,944     11,054
 Internet                                       (3,261)         -          -
                                              --------   --------   --------
   Total                                        59,965     42,166     21,402
 General corporate expense                      11,323      6,904      1,663
 One-time charges                                    -      5,274      3,491
 Interest expense and other                     15,007     12,373      5,529
                                              --------   --------   --------
   Income before taxes                        $ 33,635   $ 17,615   $ 10,719
                                              ========   ========   ========
Identifiable assets (at year end):
 Traditional                                  $246,006   $247,204   $121,475
 Specialty                                     174,603    164,320     98,252
 Internet                                       10,039          -          -
                                              --------   --------   --------
   Total                                       430,648    411,524    219,727
 Corporate assets                               24,201     26,184      4,002
                                              --------   --------   --------
   Total                                      $454,849   $437,708   $223,729
                                              ========   ========   ========

Depreciation and amortization:
 Traditional                                  $  6,129   $  6,043   $  2,433
 Specialty                                       4,499      3,058      1,814
 Internet                                          711          -          -
                                              --------   --------   --------
   Total                                        11,339      9,101      4,247
 Corporate                                         500        503        314
                                              --------   --------   --------
   Total                                      $ 11,839   $  9,604   $  4,561
                                              ========   ========   ========
Expenditures for property and equipment:
 Traditional                                  $  6,215   $    782   $  2,847
 Specialty                                       5,284      2,326        447
 Internet                                        3,280          -          -
                                              --------   --------   --------
   Total                                        14,779      3,108      3,294
 Corporate                                       2,572      1,764        264
                                              --------   --------   --------
   Total                                      $ 17,351   $  4,872   $  3,558
                                              ========   ========   ========

(a)  Operating profit is defined as operating income
     before nonrecurring acquisition and restructuring
     costs.

<PAGE>

NOTE 16-QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following presents certain unaudited quarterly
financial data for fiscal 2000 and fiscal 1999:

                                     Fiscal Year Ended April 29, 2000
                          ----------------------------------------------------
                              First     Second     Third      Fourth    Total
                          (13 weeks) (13 weeks) (13 weeks) (14 weeks) (53 weeks)

Revenues                   $194,299   $231,588   $ 97,244   $116,140  $639,271
Gross profit                 72,879     82,913     33,429     44,007   233,228
Operating income (loss)      24,564     26,701     (2,245)      (378)   48,642
Net income (loss)            11,364     12,184     (3,032)    (2,001)   18,515
Per share amounts:
   Basic                   $   0.65   $   0.70   $  (0.17)  $  (0.11)  $  1.06
   Diluted                 $   0.65   $   0.70   $  (0.17)  $  (0.11)  $  1.06




                                     Fiscal Year Ended April 24, 1999
                          ---------------------------------------------------
                              First     Second     Third      Fourth    Total
                          (13 weeks) (13 weeks) (13 weeks) (13 weeks) (52 weeks)

Revenues                   $126,657   $212,316   $ 85,359   $ 97,372  $521,704
Gross profit                 44,042     70,761     28,093     37,025   179,921
Operating income (loss)      13,326     18,674     (2,383)       371    29,988
Net income (loss)             6,563      7,430     (3,298)    (1,799)    8,896
Per share amounts:
   Basic                   $   0.45   $   0.51   $  (0.23)  $  (0.12) $   0.61
   Diluted                 $   0.44   $   0.51   $  (0.23)  $  (0.12) $   0.60


     The summation of quarterly net income per share may not
equate to the calculation for the full fiscal year as
quarterly calculations are performed on a discrete
basis.

NOTE 17-RELATED PARTY TRANSACTION

     On October 1, 1999, the Company purchased a
combined warehouse and distribution facility in
Appleton, Wisconsin.  Previously, the Company leased
this facility.  The purchase price was $2,600, the fair
market value of the property as determined by an
independent appraisal, and was paid to the owner of the
facility, which is a corporation owned by three
shareholders, two of whom are related to certain
executive officers of the Company.

<PAGE>

NOTE 18-SUBSEQUENT EVENTS

     On June 30, 2000, the Company purchased the net
assets of Global Video, Inc., for $32,000 plus a $3,000
targeted performance payment to be determined on or
about the first anniversary of the transaction.

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

         None.

<PAGE>
                       PART III

Item 10.  Directors and Executive Officers of the Registrant

     (a)  Executive Officers.  Reference is made to
          "Executive Officers of the Registrant" in
          Part I hereof.

     (b)  Directors.  The information required by this
          Item is set forth in our Proxy Statement for
          the Annual Meeting of Stockholders to be held
          on August 29, 2000, under the caption
          "Election of Directors," which information is
          incorporated by reference herein.

     (c)  Section 16 Compliance.  The information
          required by this Item is set forth in our
          Proxy Statement for the Annual Meeting of
          Stockholders to be held on August 29, 2000,
          under the caption "Section 16(a) Beneficial
          Ownership Reporting Compliance," which
          information is incorporated by reference
          herein.

Item 11.  Executive Compensation

     The information required by this Item is set forth
in our Proxy Statement for the Annual Meeting of
Stockholders to be held on August 29, 2000, under the
captions "Executive Compensation," "Employment
Contracts and Related Matters," "Director Compensation
and Other Arrangements," "Compensation Committee
Report," "Compensation Committee Interlocks and Insider
Participation," and "Performance Graph," which
information is incorporated by reference herein.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     The information required by this Item is set forth
in our Proxy Statement for the Annual Meeting of
Stockholders to be held on August 29, 2000, under the
caption "Security Ownership of Management and Certain
Beneficial Owners," which information is incorporated
by reference herein.

Item 13.  Certain Relationships and Related Transactions

     The information required by this Item is set forth
in our Proxy Statement for the Annual Meeting of
Stockholders to be held on August 29, 2000, under the
captions "Certain Relationships and Related
Transactions" and "Director Compensation and Other
Arrangements."

<PAGE>
                        PART IV

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

(a)(1)    Financial Statements.

          Consolidated Financial Statements

               Report of Independent Accountants

               Consolidated Balance Sheet as of April 29, 2000, and
               April 24, 1999

               Consolidated Statement of Operations for the
               fiscal years ended April 29, 2000 (53 weeks),
               April 24, 1999 (52 weeks), and April 25, 1998 (52 weeks)

               Consolidated Statement of Stockholders'
               Equity for the fiscal years ended April 29,
               2000 (53 weeks), April 24, 1999 (52 weeks),
               and April 25, 1998 (52 weeks)

               Consolidated Statement of Cash Flows for the
               fiscal years ended April 29, 2000 (53 weeks),
               April 24, 1999 (52 weeks), and April 25, 1998
               (52 weeks)

               Notes to Consolidated Financial Statements

(a)(2)    Financial Statement Schedule.

          Schedule for the fiscal years ended April 29, 2000
          (53 weeks), April 24, 1999 (52 weeks), and April
          25, 1998 (52 weeks):  Schedule II - Valuation and
          Qualifying Accounts.

(a)(3)    Exhibits.

          See (c) below.

(b)       Reports on Form 8-K.

          None.

(c)       Exhibits.

          See the Exhibit Index, which is incorporated by
          reference herein.

(d)       Financial Statements Excluded from Annual Report
          to Shareholders.

          Not applicable.

<PAGE>

                      SIGNATURES


     Pursuant  to  the requirements of  Section  13  or
15(d)  of  the  Securities Exchange Act  of  1934,  the
Registrant has caused this report to be signed  on  its
behalf  by  the undersigned, thereunto duly authorized,
in  the  City of Appleton, State of Wisconsin, on  July
11, 2000.

                                   SCHOOL SPECIALTY, INC.


                                   By:  /s/ Daniel P. Spalding
                                      ------------------------------------
                                      Daniel P. Spalding,
                                      Chief Executive Officer


     Each person whose signature appears below hereby
constitutes and appoints Daniel P. Spalding and Mary M.
Kabacinski, and each of them, as his or her true and
lawful attorney-in-fact and agent, with full power of
substitution, to sign on his or her behalf individually
and in the capacity stated below and to perform any
acts necessary to be done in order to file any and all
amendments to this Annual Report on Form 10-K, and to
file the same, with all exhibits thereto and all other
documents in connection therewith and each of the
undersigned does hereby ratify and confirm all that
said attorney-in-fact and agent, or his substitutes,
shall do or cause to be done by virtue thereof.

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

      Name                            Title                            Date

/s/ Daniel P. Spalding       Chief Executive Officer (Principal  July 11, 2000
-------------------------    Executive Officer) and Director
Daniel P. Spalding

/s/ Mary M. Kabacinski       Chief Financial Officer (Principal  July 11, 2000
-------------------------    Financial and Accounting Officer)
Mary M. Kabacinski

/s/ David J. Vander Zanden   President, Chief Operating Officer  July 11, 2000
--------------------------   and Director
David J. Vander Zanden

/s/ Jonathan J. Ledecky      Director                            July 11, 2000
-----------------------
Jonathan J. Ledecky

/s/ Rochelle Lamm            Director                            July 11, 2000
-------------------
Rochelle Lamm

/s/ Leo C. McKenna           Director                            July 11, 2000
-------------------
Leo C. McKenna

/s/ Jerome M. Pool           Director                            July 11, 2000
-------------------
Jerome M. Pool

<PAGE>


                   INDEX TO EXHIBITS

 Exhibit
 Number  Document Description

 3.1     Restated Certificate of Incorporation.1

 3.2     Amended and Restated Bylaws.1

 4.1     Form of Stock Certificate.1

10.1     Distribution Agreement among U.S. Office Products Company,
         Workflow Management, Inc., Aztec Consulting, Inc., Navigant
         International, Inc. and School Specialty, Inc.2

10.2     Tax Allocation Agreement among U.S. Office Products Company,
         Workflow Management, Inc., Aztec Technology Partners, Inc.,
         Navigant International, Inc. and School Specialty, Inc.1

10.3     Tax Indemnification Agreement among Workflow Management, Inc.,
         Aztec Technology Partners, Inc., Navigant International, Inc. and
         School Specialty, Inc.2

10.4     Employee Benefits Agreement among Workflow Management, Inc.,
         Aztec Technology Partners, Inc., Navigant International, Inc.
         and School Specialty, Inc.2

10.5     Employment Agreement dated September 3, 1999 between Daniel P.
         Spalding and School Specialty, Inc.3

10.6     Employment Agreement dated September 3, 1999 between Mary M.
         Kabacinski and School Specialty, Inc.3

10.7     Employment Agreement dated September 3, 1999 between Donald J.
         Noskowiak and School Specialty, Inc.3

10.8     Employment Agreement dated June 30, 1998 between Roger D. Pannier
         and School Specialty, Inc.4

10.9     Employment Agreement dated March 2, 1999 between Peter Savitz
         and School Specialty, Inc.4

10.10    Employment Agreement dated March 29, 1999 between Brian Chapin and
         School Specialty, Inc.4

10.11    Employment Agreement dated July 26, 1996 between Donald Ray Pate, Jr.
         and The Re-Print Corp.5

10.12(a) Employment Agreement dated June 27, 1997 between Richard H. Nagel
         and Sax Arts and Crafts, Inc.5

10.12(b) Covenant Not to Compete Agreement dated June 27, 1997 between
         Richard H. Nagel and Sax Arts and Crafts, Inc.9

10.13    Employment Agreement between David Vander
         Zanden and School Specialty, Inc.6

10.14    Employment Agreement between School Specialty, Inc.
         and Jonathan J. Ledecky.6

10.15    Amended Services Agreement dated as of June 8, 1998 between
         U.S. Office Products and Jonathan J. Ledecky.7

10.16    Amended and Restated 1998 Stock Incentive Plan.

<PAGE>

Exhibit
Number   Document Description

10.17    JuneBox.com, Inc. 2000 Equity Incentive Plan.

10.18    Amended and Restated Credit Agreement dated as of September 30, 1998
         among School Specialty, Inc., certain subsidiaries and affiliates
         of School Specialty, Inc., the lenders named therein and
         Nationsbank, N.A., Bank One, Wisconsin and U.S. Bank National
         Association.8

10.19    Lease dated as of June 30, 1998 between Roger D. Pannier and
         Pamela S. Pannier as lessor and School Specialty, Inc. as lessee.

10.20    Lease dated as of July 1, 1990  between Larry Joseph and Peter
         Savitz Partners as lessor and Select Service & Supply, Co.,
         Inc. as lessee including Sublease Agreement and amendments thereto.

21.1     Subsidiaries of School Specialty, Inc.

23.1     Consent of PricewaterhouseCoopers LLP.

27.1     Financial Data Schedule.

99.1     Schedule II - Valuation and Qualifying Accounts.
_____________________________

1 Incorporated by reference to School Specialty's Pre-
  Effective Amendment No. 3 to the Registration
  Statement on Form S-1 filed with the SEC on June 4,
  1998; Registration No. 333-47509.

2 Incorporated by reference to School Specialty's Pre-
  Effective Amendment No. 2 to the Registration
  Statement on Form S-1 filed with the SEC on May 18,
  1998; Registration No. 333-47509.

3 Incorporated by reference to School Specialty's Form
  10-Q for the period ended October 23, 1999, as filed
  with the SEC on December 7, 1999.

4 Incorporated by reference to School Specialty's Form
  10-Q for the period ended July 24, 1999, as filed
  with the SEC on September 7, 1999.

5 Incorporated by reference to School Specialty's Pre-
  Effective Amendment No. 1 to the Registration
  Statement on Form S-1 filed with the SEC on May 6,
  1998; Registration No. 333-46537.

6 Incorporated by reference to School Specialty's
  Annual Report on Form 10-K filed with the SEC on
  July 24, 1998.

7 Incorporated by reference to School Specialty's Pre-
  Effective Amendment No. 4 to the Registration
  Statement on Form S-1 filed with the SEC on June 9,
  1998; Registration No. 333-47509.

8 Incorporated by reference to School Specialty's Form
  10-Q for the period ended January 23, 1999, as filed
  with the SEC on March 1, 1999.

9 Incorporated by reference to School Specialty's
  Registration Statement on Form S-1 filed with the
  SEC on March 1, 1999; Registration No. 333-73103.