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 24, 1999

                          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) 734-2756

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   was
approximately $275,666,000 as of July 1, 1999.   As  of
July 1, 1999, there were 17,433,426 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 September 2, 1999.

<PAGE>


                        PART I

Item 1.  Business

     Unless the context requires otherwise, all
references to "School Specialty," "we" or "our" refers
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 24, 1999 is referred to as "fiscal 1999").*

                       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
60,000 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 both acquisitions and internal growth.  In
order to expand our geographic presence and product
range, we have acquired 20 companies since May 1996.
In August 1998, we purchased Beckley-Cardy, our largest
traditional and specialty school supply competitor.
For the fiscal year ended  April 24, 1999, our revenues
were $521.7 million and our operating income excluding
non-recurring acquisition and restructuring costs of
$5.3 million was $35.3 million, a 79% increase over
fiscal 1998.

     Our "top down" marketing approach targets school
administrators at the state, regional and local levels
using our 250 sales representatives and our School
Specialty and Beckley-Cardy 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 (previously
known as Re-Print) and our seven different specialty
catalogs.  In January 1999, we mailed over 10 million
catalogs to more than three million teachers and
curriculum specialists.  Approximately 100 employees
assist in the sale, marketing and merchandising of our
specialty products.  We are also exploring various ways
in which we can use the Internet to market and sell our
products.  As the first phase of our Internet
initiative, we launched a fully integrated e-commerce
website under the name "ClassroomDirect.com" which
offers over 13,000 items for sale.  The second phase of
our Internet initiative will be launched in fiscal
2000.  Called "JuneBox.com," this site will eventually
offer one-stop shopping for all of School Specialty's
products on-line and will also provide a community
forum and content aimed at educators.

     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.  School Specialty, Inc., a Wisconsin
corporation ("Old School") formed in October 1959, was
acquired by U.S. Office Products in May 1996.  On June
9, 1998, U.S. Office Products entirely spun off School
Specialty, whereby U.S. Office Products' shareholders
received one share of our stock for every nine shares
of U.S. Office Products stock held.  As a result of the
spin-off, U.S. Office Products retained no further
ownership of School Specialty.  At the same time as
this distribution, 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

----------------------------
*  Childcraft is a registered trademark of Childcraft Education Corp.
   School Specialty and Education Access are registered trademarks of
   School Specialty.  Sportime is a registered trademark of Sportime, LLC.
   Gresswell is a common law trademark of School Specialty.  All other
   trademarks, service marks and trade names referred

<PAGE>

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.

                   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,
108,000 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 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.

                Our Recent Acquisitions

     Beckley-Cardy.  In August 1998, we acquired the
National School Supply Company ("National School
Supply"), including its subsidiary Beckley-Cardy, Inc.
("Beckley-Cardy").  Prior to our acquisition of Beckley-
Cardy, it was the second largest general education
supply marketer in the industry.  We paid $78.1 million
in cash for National School Supply and refinanced $56.6
million of its debt with borrowings under our Senior
Credit Facility.  National School Supply had revenues
for the fiscal year ended March 31, 1998 of
approximately $176 million.

     Sportime.  In February 1999, we acquired Sportime,
LLC ("Sportime") from ProTeam.com (formerly known as
Genesis Direct, Inc.).  Sportime is a leading specialty
company focusing on physical education, athletic and
recreational products.  Sportime offers several
targeted catalogs from its early

<PAGE>

childhood offerings to a catalog focused on physically
challenged children.  We paid $23 million in cash for Sportime,
which we financed through borrowings under our Senior Credit
Facility.  Sportime had revenues for 1998 of approximately
$33 million.

     Hammond & Stephens.  In June 1998, we acquired the
business of Hammond & Stephens, Co. ("Hammond &
Stephens"), a leading publisher of school forms, such
as grade books, record books, teacher planners, student
assignment books, school year calendars, awards and
similar materials.  We paid $16.5 million in cash for
Hammond & Stephens, which we financed through
borrowings under our Senior Credit Facility.  Hammond &
Stephens had revenues for the fiscal year ended October
31, 1997 of approximately $9.1 million.

     SmartStuff.  In March 1999, we acquired SmartStuff
Development Corporation ("SmartStuff").  SmartStuff is
the developer of FoolProof software, a program with an
installed customer base of 1.5 million.  FoolProof is
a desktop software security program which limits access
by children to selected programs and applications on
desktop computers.  We paid $8.2 million for
SmartStuff, of which $3.7 million was paid in cash and
$4.5 million in shares of Common Stock (an aggregate of
204,778 shares were issued).  The cash portion of the
purchase price was financed through borrowings under
our Senior Credit Facility.  SmartStuff had revenues
for 1998 of approximately $4.2 million.

     Holsinger.  In April 1999, we acquired Holsinger
Inc. ("Holsinger").  Holsinger has been selling school
furnishings in northern California since 1948.  We paid
$1.7 million for Holsinger, of which $750,000 was paid
in cash and $950,000 in shares of Common Stock (an
aggregate of 45,849 shares were issued).  The cash
portion of the purchase price was financed through
borrowings under our Senior Credit Facility.  During
1998, Holsinger had revenues of approximately $10.9
million.

                Our Internet Initiative

     Because more schools and teachers are connecting
to the Internet, we intend to aggressively pursue 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.

     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.  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, which
we will launch in fiscal 2000 under the name
JuneBox.com, offers an education portal on the
Internet.  This portal will be structured as an
education mall offering our products for sale and also
provide 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.
We intend to enter into strategic alliances with a
number of content providers to help develop and
maintain the new website and portal with the goal to
become the Internet headquarters for teachers, product
specialists and others with an interest in education.
Prospective content providers could include media,
search engine and Internet service providers and other
Internet related companies.  This site will

<PAGE>

eventually offer one-stop shopping for all of School Specialty's
products on-line 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.

     In connection with our Internet initiative, we
have recently acquired SmartStuff.  SmartStuff is
expected to introduce Internet browser security and
filtering software products for the education market.
We intend to market our brands and Internet services to
SmartStuff's existing and future customer base by
including links to our website and portal and other
promotional materials in SmartStuff product upgrades
and new products.

                     Our Strengths

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

     Leading Market Position.  We have developed our
leading market position over our 40 year history 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 60,000 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 down"
approach through our 250 person sales force and the
School Specialty and Beckley-Cardy general supply and
furniture catalogs, and targeting teachers and
curriculum specialists with a "bottom up" approach
primarily through the mailing of over 10 million
ClassroomDirect.com general supply catalogs and our
seven different specialty catalogs each year.  We
utilize our customer database across our family of
catalogs to maximize their effectiveness and increase
our marketing reach.  We believe our new
ClassroomDirect.com Internet site offers additional
marketing opportunities.

     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.

<PAGE>

     Ability to Complete and Integrate Acquisitions.
We have successfully completed the acquisition of 20
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 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.

                  Our Growth Strategy

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

     Aggressively 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 enhance our geographic presence or
which complement our specialty product offerings.

     Increase Sales 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 37% of our revenues for the fiscal
year ended April 24, 1999, compared to approximately
20% for the year ended December 31, 1994.

     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 underrepresented and
by cross merchandising our specialty products to our
traditional customers.

     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 3.8% in 1994 to 6.8% for the
fiscal year ended April 24, 1999.  We believe that we
can further improve our operating margins by
eliminating redundant expenses of acquired businesses,
leveraging our overhead costs, increasing our
purchasing power and improving the efficiency of our
warehousing and distribution.

<PAGE>

     Pursue Internet Initiative.  Because more schools
and teachers are connecting to the Internet, we intend
to aggressively pursue 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.

                   Our 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 and Beckley-Cardy catalogs 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
60,000 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/Beckley-Cardy.  Through the
School Specialty and Beckley-Cardy catalogs, which are
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.  Over the
next year, we expect to integrate these two general
catalogs.  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.

     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 new fully
integrated Internet e-commerce website.  The new
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 17 professional artists to
respond to customer questions.

<PAGE>

     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
FoolProof software, a desktop software security
program which limits access by children to selected
programs and applications on desktop computers.
SmartStuff is expected to introduce Internet browser
security and filtering software products for the
education market.

     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.

                Our Sales and Marketing

     Our Two-Pronged Approach.  As previously
discussed, we believe we have developed a substantially
different sales and marketing model from that of
traditional school supply and school furnishings
distribution 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.  As part of the integration
of Beckley-Cardy into our School Specialty traditional
supply business, we restructured our traditional sales
and marketing operations from a decentralized regional
system to a more centralized national structure.  Our
national marketing model has 250 sales representatives
operating within 15 regions supported by regional
managers and two regional customer service and sales
support call centers.  The reorganization reallocated
sales territories, selectively reduced the combined
sales and management force and reduced the number of
regional customer service/sales support locations from
12 to four in fiscal 1999 with two more to close in
fiscal 2000.  We believe our new national structure
significantly improves our effectiveness through better
sales management, resulting in higher regional
penetration, and achieves significant cost savings
through the reduction in number of distribution and
call centers.

     We have a broad customer base and no single
customer accounted for more than 2% of sales during
fiscal 1999, 1998 and 1997.  Schools typically purchase
school supplies and furniture based on an

<PAGE>

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.

     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 and
Beckley-Cardy catalogs and respond to quote and bid
requests for furniture and equipment.  In addition,
local sales representatives work with our corporate
sales force and school supply buyers to achieve an
acceptable pricing structure based upon the mix of
products being purchased.  The pricing structure of
specialty products offered through direct marketing is
generally not subject to negotiation.

                     Distribution

     We distribute products through our distribution
centers and place customer orders directly with our
suppliers.  Furniture is generally shipped directly
from the manufacturer to the customer.

     We have adopted a plan to rationalize our
distribution systems following the Beckley-Cardy
acquisition.  Under this plan, we will close five of
our 13 regional distribution centers and centrally
manage the remaining eight.  We have already closed two
regional distribution centers and expect to close the
remaining three by December 31, 1999.  We believe this
restructuring will improve our distribution efficiency
and generate significant cost savings.

        Our 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

<PAGE>

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 our Order
Management System, 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
1998 exceeded 97%.  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.

                Our 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 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 either the
SFD system or 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.

<PAGE>

     Although we have two principal information
systems, both the SFD system and MACS integrate general
ledger, purchasing and inventory management functions.
The 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.  For information on Year 2000
compliance of our information systems, see "Item
7-Management's Discussion and Analysis of Financial
Condition and Results of Operations-Year 2000."

                    Our 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.

                     Our Employees

     As of July 1, 1999, we had approximately 2,100
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, 1999, approximately 40 of
our 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 sales,
revenues, 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 sales, revenues, 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
sales, revenues, earnings and costs.  Our actual
results may differ materially from those contained in
the forward-looking statements identified above.
Factors which may cause such a difference to occur
include, but are not limited to, the following:

     Potential Tax Liability from Spin-Offs.  We became
a public company on June 9, 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.  These distributions (known as the "spin-
offs") were intended to be tax-free to both U.S. Office
Products and its shareholders.  As part of 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

<PAGE>

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 estimate that our portion of any
such tax losses under this agreement would be
approximately 14.4%.  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.  As a result of
these agreements, we could be required to pay:

    *  all of the tax losses of U.S. Office Products if
       we cause the distributions to be taxable,

    *  our portion of the tax losses of U.S. Office
       Products even if neither we nor any of the other three
       companies cause the distributions to be taxable, or

    *  all of the tax losses of U.S. Office Products even
       if we did not cause the distributions to be taxable and
       one or more of the other companies did (while such
       other companies would be required to reimburse us for
       such payment, we cannot be sure that we will receive
       such reimbursement).

     Exposure to Risks Related to Other Liabilities of
U.S. Office Products.  As part of the distributions, 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.  These shared liabilities
do not include any liability that relates specifically
to a particular spin-off company or to the continuing
businesses of U.S. Office Products after the
distributions.  The portion of the shared liabilities
payable by each spin-off company is based on the
average of each company's revenues for fiscal 1998
relative to those of U.S. Office Products and each
company's operating income for fiscal 1998 relative to
that of U.S. Office Products.  We estimate that our
portion of any such liabilities under this agreement
would be approximately 9.8%, but 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.  As
a result of these agreements, we may be required to pay
up to $1.75 million to U.S. Office Products for shared
liabilities even though they are unrelated to our
business and operations, we have no control over such
liabilities and one or more of the other spin-off
companies may be primarily responsible for such
liabilities.

     Limited Independent Operating History.  Prior to
the spin-off in June 1998, we operated as a wholly
owned subsidiary of U.S. Office Products and many of
our general, administrative and financial functions
(including legal, accounting, purchasing, management
information services and borrowings) were handled by
U.S. Office Products.  Since the spin-off, we have
operated independently of U.S. Office Products and have
been independently responsible for managing and
financing all aspects of our business and operations.
Our expenses are likely to be higher than when we were
a subsidiary of U.S. Office Products and we may
experience difficulties with respect to general,
administrative and financial functions that we did not
experience as part of U.S. Office Products.  Because
some of the financial information included in this
Annual Report relates to periods during which we were a
subsidiary of U.S. Office Products, it does not
necessarily reflect what our results of operations and
financial condition

<PAGE>

would have been it we were
independent during those periods and it may not be a
good indication of what our future results of
operations and financial condition will be.

     Risk of Rapid Growth and Dependence Upon
Acquisitions for Future Growth.  Our business has grown
significantly through acquisitions in recent years.
Since May 1996, we have acquired 20 companies.  Future
growth in our revenues and earnings depends
substantially on our ability to continue to acquire and
successfully integrate and operate school supply
companies.  We cannot guarantee that we will be able to
identify and acquire businesses at all or on reasonable
terms.  In addition, we cannot be sure that we will be
able to operate the businesses that we acquire
profitably or that our management and financial
controls, personnel, computer systems and other
corporate support systems will be adequate to manage
the increased size and scope of our operations as a
result of acquisitions.  Managing and integrating
acquired businesses may result in substantial costs,
delays or other operating or financial problems that
could materially and adversely affect our financial
condition and results of operations.  These include:

    *  the diversion of management's attention and other
       resources away from our existing businesses,

    *  significant charges and expenses relating to
       employee severance, restructuring and transaction costs
       and other unexpected events or liabilities,

    *  the inability to retain, hire or train qualified
       personnel for the acquired businesses, and

    *  the amortization of goodwill and other acquired
       intangible assets.

     We intend to pay for acquisitions in whole or in
part using our shares, and in some cases this may
dilute our earnings per share.  Our ability and
willingness to use our shares will depend upon their
market price and the willingness of sellers to accept
our shares.  In addition, our ability to issue shares
may be limited by Section 355(e) of the Internal
Revenue Code of 1986.  Under that Section, U.S. Office
Products will incur tax liability for the distribution
of our shares if 50% or more, by vote or value, of the
capital stock of either U.S. Office Products or School
Specialty is acquired by one or more persons acting
pursuant to a plan or series of related transactions
that includes the spin-off.  There is a presumption
that any acquisition occurring within two years after
the spin-off is pursuant to a plan that includes the
spin-off.  However, the presumption may be overcome by
establishing that the spin-off and such acquisition are
not part of a plan or series of related transactions.
As noted above, we will be liable for all the tax
liabilities of U.S. Office Products if our actions
cause the spin-off to be taxable and will be liable for
all or a portion of such liabilities even if our
actions did not cause the spin-off to be taxable.

     Inability to Use the Pooling-of-Interests Method
of Accounting; Material Amount of Goodwill.  Under
generally accepted accounting principles, we must be
independent for at least two years before we can use
the pooling-of-interests method of accounting for share
acquisitions, which would avoid the creation and
subsequent amortization of goodwill.  Because we were a
wholly owned subsidiary of U.S. Office Products until
the completion of the spin-off on June 9, 1998, we will
not be eligible to use pooling-of-interest accounting
until June 9, 2000.  We must use purchase accounting
for any acquisitions prior to that date, which may
continue to result in the creation of goodwill.

     Approximately $201.2 million, or 46%, of our total
assets as of April 24, 1999 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

<PAGE>

over a period of 40 years, which means that in each year
during the 40-year period 1/40th of the goodwill is
taken off our balance sheet and recorded in our income
statement as a non-cash expense (which reduces our net
income).  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 and financial condition.

     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 the school
year in September, 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
fiscal quarter.  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.  We were, for example, adversely affected
by the United Parcel Service strike during August 1997
due to the perception that we were unable to ship
products.  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

<PAGE>

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; Our Year 2000 Issues.
We believe that one of our competitive advantages is
our information systems, including our proprietary
PC-based customer Order Management System.  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 foreign
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.

     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
includes it, potentially causing data miscalculations
or inaccuracies or operational malfunctions or
failures.  Because any disruption to our computerized
order processing and inventory systems could materially
and adversely affect our operations, we have
established a centrally managed, company wide plan to
identify, evaluate and address Year 2000 issues.
Although most of our mission critical systems, network
elements and products were verified for Year 2000
compliance as of the end of June 1999, we may still be
susceptible to Year 2000-related problems.  In
addition, if our suppliers, service providers and/or
customers fail to resolve their Year 2000 issues in an
effective and timely manner, our business could be
significantly and adversely affected.  We believe that
some of our school customers have not yet addressed or
resolved their Year 2000 issues.

     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 Senior Credit Facility
contains restrictions on, and in some circumstances may
prevent, our payment of dividends.

     Leverage.  As of April 24, 1999, we had $172.5
million of bank debt outstanding.  In addition, our
leverage could increase over time.  Our Senior Credit
Facility permits us to incur additional debt under
certain circumstances and we expect to borrow under our
Senior 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:

<PAGE>
    *  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, we will be
able to sell our equity securities, sell assets or
restructure and refinance our debt.  Our substantial
debt could have important consequences to our
stockholders.  For example, it could:

    *  make it more difficult for us to obtain additional
       financing in the future for our acquisitions and
       operations,

    *  require us to dedicate a substantial portion of
       our cash flows from operations to the repayment of our
       debt and the interest associated with our debt,

    *  limit our operating flexibility due to financial
       and other restrictive covenants, including restrictions
       on incurring additional debt, creating liens on our
       property and paying dividends,

    *  subject us to risks that interest rates and our
       interest expense will increase,

    *  place us at a competitive disadvantage compared to
       our competitors that have less debt, and

    *  make us more vulnerable in the event of a downturn in our business.

Item 2.  Properties

     Our corporate headquarters are located at 1000
North Bluemound Drive, Appleton, Wisconsin, a combined
office and warehouse facility of approximately 120,000
square feet.  Our lease on the Appleton headquarters
expires on December 31, 2001, although we are currently
negotiating with the owners of the facility (consisting
of the father and uncle of our Chief Executive Officer,
Daniel P. Spalding, and one other unrelated party) to
purchase the property during the second quarter of
fiscal 2000.  See "Item 13-Certain Relationships and
Related Transactions" for more information.  We lease
or own the following additional principal distribution
facilities:

                             Approximate
                               Square     Owned/
          Locations            Footage    Leased       Lease Expiration

Agawam, Massachusetts         163,300     Owned*        -
Atlanta Georgia                76,913     Leased        January 6, 2002
Birmingham, Alabama           180,365     Leased        November 30, 2006
Bowling Green, Kentucky        42,000     Leased        June 30, 2001
Carson City, Nevada            80,000     Owned         -
Fremont, Nebraska              95,000     Leased        June 30, 2003
Fresno, California             18,480     Leased        December 31, 2001
Hoddesdon, England             47,500     Leased        September 24, 2006
Lancaster, Pennsylvania        72,947     Leased        December 31, 2002
Lancaster, Pennsylvania       165,750     Leased        February 28, 2009
Lufkin, Texas                 140,000     Owned*        -

<PAGE>

Mansfield, Ohio               323,000     Owned*        -
New Berlin, Wisconsin          97,500     Leased        March 31, 2002
Oklahoma City, Oklahoma        37,340     Leased        July 16, 2001
Portland, Oregon               30,456     Leased        May 31, 2001
Salina, Kansas                123,000     Owned*        -
Union City, California         14,494     Leased        April 7, 2000
Ontario, California            16,786     Leased        October 14, 2000
__________

* We are currently considering a sale and leaseback
  transaction involving certain of our owned
  distribution centers and other properties.  See "Item
  7-Management's Discussion and Analysis of Financial
  Condition and Results of Operations-Liquidity and
  Capital Resources."

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

     We believe that our properties are adequate to
support our operations for the foreseeable future.  We
regularly review the consolidation of our facilities.

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 was no matter submitted during the quarter
ended April 24, 1999 to a vote of our security holders.

<PAGE>


         EXECUTIVE OFFICERS OF THE REGISTRANT

     As of July 19, 1999, the record date of our 1999
Annual Meeting of Stockholders, the following persons
served as executive officers of School Specialty:

 Name and Age
  of Officer                         Office

Daniel P. Spalding       Mr. Spalding became Chairman of the Board and
   Age 44                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 Old School.  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 44               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.

Donald J. Noskowiak      Mr. Noskowiak has served as Chief Financial
   Age 41                Officer of School Specialty since 1997.  In
                         February 1998, Mr. Noskowiak became an Executive
                         Vice President of School Specialty. He was Vice
                         President, Treasurer and Principal Financial
                         Officer of Old School from 1994 until 1997.
                         From 1992 to 1994, he was the Corporate
                         Controller of Old School.

Douglas Moskonas         Mr. Moskonas has served as Executive Vice
   Age 54                President of School Specialty for School
                         Specialty Divisions since completion of the spin-
                         off from U.S. Office Products in June 1998.  Mr.
                         Moskonas joined Old School in 1993 as Vice
                         President of Sales for the Valley Division.  He
                         served as General Manager for the Valley
                         Division from 1994 to 1996 and was appointed
                         President of School Specialty Divisions in 1997.
                         Prior to joining School Specialty, Mr. Moskonas
                         served as Vice President of Sales for Emmons-
                         Napp Office Products from 1979 to 1993.

Melvin D. Hilbrown       Mr. Hilbrown has served as Executive Vice
   Age 51                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.

<PAGE>

Richard H. Nagel        Mr. Nagel has served as Executive Vice President
    Age 58              of School Specialty for Sax Arts and Crafts
                        since completion of the spin-off from U.S.
                        Office Products in June 1998.  Mr. Nagel joined
                        School Specialty with the acquisition of Sax
                        Arts and Crafts in 1997.  Mr. Nagel had been
                        with Sax Arts and Crafts since 1975 when he was
                        hired as Assistant General Manager.  He was
                        named Vice President/General Manager of Sax Arts
                        and Crafts in 1984 and President of Sax Arts and
                        Crafts in 1990.

Donald Ray Pate, Jr.    Mr. Pate has served as Executive Vice President
   Age 36               of School Specialty for ClassroomDirect.com
                        since completion of the spin-off from U.S.
                        Office Products in 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 53              President of School Specialty for Childcraft
                        since completion of the spin-off from U.S.
                        Office Products in June 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 Vice President and
    Age 42              Chief Information Officer of School Specialty
                        since March 1999.  Mr. Killoren was Chief
                        Operating Officer of School Specialty
                        Distribution from 1997 to 1999 and Vice
                        President Operations from 1992 to 1997.

Brian E. Chapin         Mr. Chapin has served as Executive Vice
    Age 47              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 50              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 59            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.

Roger D. Pannier      Mr. Pannier has served as Executive Vice
    Age 48            President of School Specialty for Hammond &
                      Stephens since School Specialty acquired Hammond
                      & Stephens in June 1998.  Mr. Pannier was
                      Chairman from 1993 to 1998 and President from
                      1989 to 1993 and joined Hammond & Stephens as
                      Controller in 1979.

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

<PAGE>

     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.

     Fiscal quarter ended            High              Low

     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, 1999, there were 3,514 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 Senior Credit Facility
contains restrictions on, and in some circumstances may
prevent, our payment of dividends.

Recent Sales of Unregistered Securities

     During the fiscal year ended April 24, 1999, we
issued the following equity securities in transactions
that were not registered under the Securities Act of
1933, as amended (the "Securities Act"):

     On March 29, 1999, we issued 204,778 shares of
Common Stock in connection with the acquisition of
SmartStuff.  Out of the $8.2 million we paid for
SmartStuff, $3.7 million was paid in cash and $4.5
million in shares of Common Stock.  The shares of the
Common Stock were issued without registration under the
Securities Act in reliance on Section 4(2) thereunder.

     On April 20, 1999, we issued 45,849 shares of
Common Stock in connection with the acquisition of
Holsinger.  Out of the $1.7 million we paid for
Holsinger, $750,000 was paid in cash and $950,000 was
paid in shares of Common Stock.  The shares of the
Common Stock were issued without registration under the
Securities Act in reliance on Section 4(2) thereunder.

<PAGE>

Item 6.  Selected Financial Data

          SELECTED HISTORICAL FINANCIAL DATA
      (in thousands, except per share data)  (1)
<TABLE>
<CAPTION>
                                                                Four
                                                                Months
                              Fiscal Year Ended                 Ended        Fiscal Year Ended
                        April 24,    April 25,    April 26,    April 30,        December 31,
                         1992(2)      1998(2)      1997(2)      1996(2)       1995(2)    1994(2)
                          <S>          <C>          <C>          <C>           <C>        <C>
Statement of Income Data:

Revenues                $521,704    $310,455    $191,746      $ 28,616     $150,482   $119,510
Cost of revenues         341,783     202,870     126,862        18,591       98,233     82,951
Gross profit            $179,921    $107,585    $ 64,884      $ 10,025     $ 52,249   $ 36,559
Selling, general
and administrative
expenses                 144,659      87,846      53,177        11,917       47,393     32,080
Non-recurring
acquisition costs              -           -       1,792         1,122            -          -
Restructuring costs        5,274       3,491         194             -        2,532          -
Operating income
(loss)                  $ 29,988    $ 16,248    $  9,721      $ (3,014)    $  2,324   $  4,479
Interest expense (net)    12,601       5,373       4,197         1,455        5,536      3,007
Other (income)
expense                    (228)         156        (196)           67          (18)       (86)
Income (loss)
before provision
for (benefit from)
income taxes            $ 17,615    $ 10,719    $  5,720      $ (4,536)    $ (3,194)  $  1,558
Provision for
(benefit from)
income taxes (3)           8,719       5,480      (2,412)          139          173        218
Net income (loss)       $  8,896    $  5,239    $  8,132      $ (4,675)    $ (3,367)  $  1,340
Net income (loss)
per share:
  Basic                 $   0.61    $   0.40    $   0.81      $  (0.54)    $  (0.51)  $   0.26
  Diluted                   0.60        0.39        0.80         (0.53)       (0.50)      0.26
Weighted average
shares outstanding:
  Basic                   14,690      13,284      10,003         8,611        6,562      5,062
  Diluted                 14,840      13,547      10,196         8,789        6,669      5,078


                         April 24,   April 25,    April 26,    April 30,        December 31,
                          1999        1998         1997         1996          1995       1994
Balance Sheet Data:
Working capital
(deficit)               $117,194    $ 47,791    $ 14,491      $ (3,663)    $ (1,052)   $ 3,512
Total assets             437,708     223,729      87,685        54,573       54,040     44,267
Long-term debt           161,691      63,014      33,792        15,031       15,294     11,675
Total debt               173,285      83,302      60,746        40,918       39,783     32,276
Stockholders'
equity (defecit)         202,687     106,466      16,329        (4,267)        (620)     1,827
__________

</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 reclassifications have been made to the
       historical financial data for the fiscal years ended
       December 31, 1994 and 1995, the four months ended
       April 30, 1996, and the fiscal years ended April 26,
       1997 and April 25, 1998 to conform with the fiscal
       1999 presentation.  These reclassifications had no
       effect on net income or net income per share.

(3)    Results for the fiscal year ended April 26,
       1997 include a benefit from income taxes of $2.4
       million primarily arising from the reversal of a
       $5.3 million valuation allowance in the quarter
       ended April 26, 1997.  The

<PAGE>

       valuation allowance had been established in 1995 to
       offset the tax benef it 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
60,000 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 acquisitions and internal growth.  In order to
expand our geographic presence and product range, we
have acquired 20 companies since May 1996.  In August
1998, we purchased Beckley-Cardy, our largest
traditional and specialty school supply competitor.

     Revenues have increased from $119.5 million for
the fiscal year ended December 31, 1994 to $521.7
million for the fiscal year ended April 24, 1999.  This
increase resulted primarily from 21 acquisitions, 20 of
which occurred from fiscal 1997 through fiscal 1999, as
well as internally generated growth.  Our revenues for
the fiscal year ended April 24, 1999 were $521.7
million and our operating income before non-recurring
acquisition and restructuring costs was $35.3 million,
which represented compound annual increases of 40% and
60%, respectively, compared to our historical results
for the year ended December 31, 1994.  While
acquisitions have the effect of increasing overall
revenues, there may be short-term reductions in the
revenues of the acquired businesses due to
rationalization of product line and sales force
integrations and reductions.

     Our gross profit 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 and we have
used this to reduce the cost of the products we
purchase.  Acquisitions of traditional businesses may
have a negative impact on our gross margin, although
over time we should benefit from increased purchasing
power leverage.  We believe that we can continue to
improve our gross margins by acquiring specialty
businesses and by leveraging increased purchasing
power.

     Our operating margins have also improved
significantly over the last several years.  This
improvement reflects our recent acquisitions of
specialty companies which 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.  In addition, because our
business is seasonal, the timing of our acquisitions
may affect the comparability of our operating margins
in the short term.  In particular, we have historically
made many of our acquisitions during our peak selling
period (the first two quarters of

<PAGE>

our fiscal year) when operating margins are at their highest.
Because they have been accounted for using the purchase
method of accounting, these acquisitions have caused our
operating margins for the year in which the
acquisitions occurred to be higher than they would have
been if the results of the acquired businesses had been
included for the full year.

     The benefit from income taxes in fiscal 1997 of
$2.4 million reflects the reversal of a $5.3 million
deferred tax valuation allowance in the fourth quarter.
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
effective tax rate for future periods may fluctuate
based on the size and structure of acquisitions and the
tax deductible nature of acquired goodwill.  See
"-Consolidated Historical Results of Operations."

     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 April
through July in anticipation of the peak shipping
season.  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 fiscal quarter.

     Until June 9, 2000, we will be limited to using
the purchase method of accounting for acquisitions.
Under the purchase method of accounting, the costs of
an acquisition over the fair value of the net assets
acquired is goodwill, which is recorded as an
intangible asset on the balance sheet and amortized
over a period of years.  We generally amortize goodwill
on a straight-line basis over a period of 40 years.  In
addition to the purchase price, the costs of an
acquisition generally include expenses relating to the
acquisition of the acquired company, including
investment banking, legal and accounting fees and
severance and facility closing costs.

     As part of the process of integrating
acquisitions, we also incur costs relating to the
restructuring of various aspects of our operations,
such as the consolidation of warehouse facilities,
customer service centers and sales operations.  These
costs typically include:  costs to exit the facility,
such as rent under remaining lease terms, occupancy,
relocation costs and facility restoration; employee
costs, such as severance; and asset impairment costs.
If these costs relate solely to the operations of the
acquired company and are anticipated at the time of the
acquisition, they are capitalized as part of the
acquisition costs.  If these costs relate to our
existing operations, even if they result from an
acquisition, such costs are recorded as restructuring
charges in the year they are incurred and have the
effect of reducing net income for that year.  We expect
to incur restructuring costs from time to time in the
future as we continue to acquire and integrate
companies.  Although we believe that the restructuring
charges we have taken to date are adequate, we cannot
predict the magnitude or timing of restructuring
charges that we may take in the future.

     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.  Old School, a Wisconsin corporation
formed in October 1959, was acquired by U.S. Office
Products in May 1996.  The Re-Print Corp., the
predecessor to ClassroomDirect.com, LLC, our wholly
owned subsidiary, has been in operation since 1921 and
was acquired by U.S. Office Products in July 1996.  Our
consolidated financial statements give retroactive
effect to these two business combinations under the
pooling-of-interests method (Old School and The
Re-Print Corp. are referred to as the "Pooled
Companies") and include the results of companies
acquired in business combinations accounted for under
the purchase method from their respective dates of
acquisition.  Prior to their respective dates of
acquisition by U.S. Office Products, the Pooled
Companies reported results on years ending on December
31.  Effective for fiscal 1997, the Pooled Companies
changed their year-ends from December 31 to a fiscal
year which ends on the last Saturday in April.

<PAGE>

Results of Operations

     The following table sets forth certain information
as a percentage of revenues on an historical basis
concerning our results of operations for the fiscal
years ended April 24, 1999 ("fiscal 1999"), April 25,
1998 ("fiscal 1998") and April 26, 1997 ("fiscal 1997").

                                          Fiscal Year Ended
                               April 24,     April 25,     April 26,
                                1999          1998          1997

Revenues                       100.0%         100.0%        100.0%
Cost of revenues                65.5           65.3          66.2
   Gross profit                 34.5           34.7          33.8
Selling, general and
administrative expenses         27.7           28.3          27.7
Non-recurring acquisition
costs                              -              -           0.9
Restructuring costs              1.0            1.1           0.1
   Operating income              5.8            5.3           5.1
Interest expense, net            2.4            1.8           2.2
Other (income) expense             -            0.1          (0.1)
Income before provision for
(benefit from)
income taxes                     3.4            3.4           3.0
Provision for (benefit from)
income taxes                     1.7            1.8          (1.3)
Net income (loss)                1.7%           1.6%          4.3%


Consolidated Historical Results of Operations

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

     Consolidated revenues increased 68%, from $310.5
million for fiscal 1998 to $521.7 million for fiscal
1999.  This increase was due primarily to the inclusion
in fiscal 1999 of (1) the revenues of five businesses
acquired during fiscal 1999 from their respective dates
of acquisition and (2) all of the fiscal 1999 revenues
of eight businesses acquired in fiscal l998 (whose
revenues were included in fiscal 1998 only from the
date of acquisition).  Consolidated revenues also
increased due to sales to new accounts, increased sales
to existing customers and higher pricing on certain
products in response to increased product costs.

     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 margins (gross profit as a percentage of
revenues) declined slightly from 34.7% for fiscal 1998
to 34.5% for fiscal 1999.  Gross margins were reduced
by the acquisition of Beckley-Cardy in the second
quarter of fiscal 1999 (which had a lower gross margin
than our existing businesses) and an increase in lower
margin bid revenues in our traditional businesses.
These reductions in gross margins were almost entirely
offset by the positive impact of increased sales of
higher margin specialty products and lower product
costs due to higher vendor purchase rebates, which
reflected our increased buying power.

     Selling, general and administrative expenses
include selling expenses (the most significant
component of which is sales wages and commissions),
catalog costs, occupancy costs, delivery costs, general
administrative overhead (which includes information
systems and customer service) and accounting, legal,
human resources and purchasing expenses.  Selling,
general and administrative expenses (including
depreciation and amortization) 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 0.60% 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

<PAGE>

savings attributable to the integration of companies acquired
during fiscal 1998 and the consolidation of our warehousing
under the restructuring plan discussed below.  These savings
as a percentage of revenues 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 acquisitions referred to above.

     We use grants of employee stock options to provide
an incentive to employees by increasing their ownership
interests in our shares.  This helps to align their
interests with the interests of our stockholders.  In
connection with the spin-off from U.S. Office Products
in June 1998, various replacement options were issued
at the prior exercise price adjusted for the spin-off
in accordance with Accounting Principles Board ("APB")
Opinion No. 25.  If we had recorded compensation
expense based upon the fair market value of the stock
options on the dates of grant under the methodology
prescribed by Statement of Financial Accounting
Standards ("SFAS") No. 123, our net income for the
fiscal year ended April 24, 1999 would have been
reduced by approximately $10.6 million or 120%.

     Restructuring charges during fiscal 1999 included
(1) a non-cash restructuring charge of $1.1 million in
the first quarter of fiscal 1999, consisting of
compensation expense attributed to the U.S. Office
Products stock option tender offer and the sale of
shares of Common Stock to certain officers and
directors, net of underwriting discounts and (2) a $4.2
million restructuring charge in the second quarter of
fiscal 1999 relating to our plan to consolidate our
existing warehousing, customer service and sales
operations following the acquisition of Beckley-Cardy.
Under this restructuring plan, we intend to reduce our
distribution centers from 13 to eight and our customer
service centers from seven to two during the period
from October 1998 through December 1999.  The $4.2
million charge consists of $2.1 million for employee
severance and termination benefits, $1.3 million for
lease termination and facility shut-down costs and $0.8
million for write down of fixed assets and inventories.
On an after-tax basis, these restructuring charges
reduced net income for fiscal 1999 by $3.2 million.

     Interest expense, net of interest income,
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 primarily due to the increase
in debt attributable to the acquisition of five
businesses since April 24, 1998, partially offset by
the reduction in debt from applying the net proceeds
from our secondary public offering of Common Stock, our
initial public offering of Common Stock and concurrent
offering to certain officers and directors and the
forgiveness of debt from U.S. Office Products in
connection with the spin-off.

     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%
for fiscal 1999 and 51.1% for fiscal 1998.  The higher
effective tax rate, compared to the federal statutory
rate of 35%, is primarily due to state income taxes and
nondeductible goodwill amortization.

     Year Ended April 25, 1998 Compared to Year Ended April 26, 1997

     Consolidated revenues increased 61.9%, from $191.7
million for fiscal 1997 to $310.5 million for fiscal
1998.  This increase was primarily due to the inclusion
of revenues from the eight companies acquired in
business combinations accounted for under the purchase
method during fiscal 1998 (the "Fiscal 1998 Purchased
Companies") from their respective dates of acquisition
and revenues from the six companies acquired during
fiscal 1997 in business combinations accounted for
under the purchase method (the "Fiscal 1997 Purchased
Companies" and together with the Fiscal 1998 Purchased
Companies, the "Purchased Companies") for the entire
period.  Revenues also increased due to sales to new
accounts, increased sales to existing customers and
higher pricing on certain products in response to

<PAGE>

increased product costs.  Product cost is the most
significant element in cost of revenues.  Inbound
freight, occupancy and delivery charges are also
included in cost of revenues.

     Gross profit increased 65.8%, from $64.9 million,
or 33.8% of revenues, for fiscal 1997 to $107.6
million, or 34.7% of revenues, for fiscal 1998.  The
increase in gross profit as a percentage of revenues
was due primarily to an increase in revenues from
higher margin products, primarily as a result of the
purchase acquisitions of three companies selling higher
margin specialty product lines during fiscal 1998, and
as a result of improved purchasing power and rebate
programs negotiated with vendors.  These factors were
partially offset by an increase in the cost of revenues
as a result of the increased freight costs caused by
the United Parcel Service strike in the summer of 1997
and an increase in the portion of revenues represented
by lower margin bid revenues.

     Selling, general and administrative expenses
(including depreciation and amortization) increased
65.2%, from $53.2 million, or 27.7% of revenues, for
fiscal 1997 to $87.8 million, or 28.3% of revenues, for
fiscal 1998.  The increase in selling, general and
administrative expenses as a percentage of revenues was
due primarily to the purchase acquisition of three
specialty companies during fiscal 1998, which typically
have higher operating expenses as a percentage of
revenue, partially offset by the efficiencies generated
from the elimination of certain redundant
administrative functions, including purchasing,
accounting, finance and information systems, of the
Fiscal 1997 Purchased Companies and the consolidation
of two warehouses into one regional facility in the
Northeastern U.S. during the third quarter of fiscal
1997.  We have established a 12-month integration
process for acquisitions in which a transition team is
assigned to (1) sell or discontinue incompatible
business units, (2) reduce the number of stock keeping
units, (3) eliminate redundant administrative
functions, (4) integrate the acquired entity's
management information systems and (5) improve buying
power.  However, the length of time it takes us to
fully implement our strategy for assimilating an
acquired company can vary depending on the nature of
the company acquired and the season in which it is
acquired.

     We use grants of employee stock options to provide
an incentive to employees by increasing their ownership
interests in our shares.  This helps to align their
interests with the interests of our stockholders.  In
connection with the spin-off from U.S. Office Products
in June 1998, various replacement options were issued
at the prior exercise price adjusted for the spin-off
in accordance with APB Opinion No. 25.  If we had
recorded compensation expense based upon the fair
market value of the stock options on the dates of grant
under the methodology prescribed by SFAS No. 123, our
net income for the fiscal year ended April 25, 1998
would have been reduced by approximately $0.8 million
or 15.3%.

     In the fourth quarter of fiscal 1998, we recorded
approximately $2.5 million of nonrecurring costs,
primarily consisting of a write-down of deferred
catalog costs, employee severance and asset impairment
costs, and $1 million of the transaction costs
allocated to us under the distribution agreement
entered into with U.S. Office Products and the other
spin-off companies.  We incurred non-recurring
acquisition costs of $1.8 million in fiscal 1997, in
conjunction with the acquisition of the Pooled
Companies.  These non-recurring acquisition costs
included accounting, legal, investment-banking fees,
real estate and environmental assessments and
appraisals and various regulatory fees.  We are
required by GAAP to expense all acquisition costs (both
those paid by us and those paid by the sellers of the
acquired companies) related to business combinations
accounted for under the pooling-of-interests method of
accounting.  In accordance with GAAP, we will be unable
to use the pooling-of-interests method to account for
acquisitions for a period of two years from June 9,
1998.  During this period, we will not reflect any non-
recurring acquisition costs in our results of
operations, as all costs incurred of this nature would
be related to acquisitions accounted for under the
purchase method and would, therefore, be capitalized as
a portion of the purchase consideration.

<PAGE>

     From the time U.S. Office Products acquired the
Pooled Companies, we were allocated interest based upon
our average outstanding payable balance with U.S.
Office Products at U.S. Office Products' weighted
average interest rate during such period.  Interest
expense, net of interest income, increased 28.0%, from
$4.2 million for fiscal 1997 to $5.4 million for fiscal
1998.  The increase was due primarily to higher amounts
payable to U.S. Office Products incurred as a result of
the acquisition of the eight companies acquired in
fiscal 1998.

     Provision for income taxes increased from a tax
benefit of $2.4 million for fiscal 1997 to a tax
expense of $5.5 million for fiscal 1998.  The high
effective income tax rate of 51.1% for fiscal 1998,
compared to the federal statutory rate of 35%, was
primarily due to state income taxes, non-deductible
goodwill amortization and U.S. Office Products' share
of distribution costs.  In 1995, we recorded a
valuation allowance of $5.3 million on a deferred tax
asset resulting from the net operating loss
carryforwards created during 1995.  The valuation
allowance had been established by one of the Pooled
Companies prior to its acquisition by U.S. Office
Products to offset the tax benefit from such loss
carryforwards, because at the time it was not likely
that such tax benefit would be realized.  The benefit
from income taxes in fiscal 1997 of $2.4 million arose
primarily from the reversal of the $5.3 million
deferred tax asset valuation allowance in the fourth
quarter.  The valuation allowance was reversed
subsequent to U.S. Office Products acquiring us,
because it was deemed "more likely than not," based on
improved results, that the tax benefit from such
operating loss carryforwards would be realized.

Liquidity and Capital Resources

     At April 24, 1999, we had working capital of
$117.2 million.  Our capitalization at April 24, 1999
was $375.2 million and consisted of bank debt of $172.5
million and stockholders' equity of $202.7 million.

     We currently have a five year secured $350 million
revolving Senior Credit Facility with NationsBank, N.A.
The Senior 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 24, 1999
under the Senior Credit Facility was approximately
$172.5 million, consisting of $75 million outstanding
under the revolving loan portion of the facility and
$97.5 million outstanding under the term loan portion
of the facility.  Borrowings under the Senior 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 Senior Credit Facility.  The agreement
fixes the 30 day LIBOR interest rate at 4.37% per annum
(floating LIBOR on April 24, 1999 was 4.91%) 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 24, 1999, the effective
interest rate on borrowings under our Senior Credit
Facility was approximately 7.9%.  In fiscal 1999, we
borrowed under the Senior Credit facility to fund five
acquisitions and for seasonal working capital and
capital expenditures.

     On April 16, 1999, we sold 2,400,000 shares of
Common Stock in a public offering for $40.6 million in
net proceeds.  On May 17, 1999, we sold an additional
151,410 shares of Common Stock to cover over-allotments
for $2.6 million in net proceeds.  The total net
proceeds to us of $43.2 million were used to reduce
indebtedness outstanding under our Senior Credit
Facility.  We intend to make certain immaterial changes
to certain financial and other covenants under the
Senior 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.  In addition, we sold 250,000 shares of
Common Stock in a concurrent offering directly to
Daniel P. Spalding, our Chairman of the Board and Chief
Executive Officer, David J. Vander

<PAGE>

Zanden, our President and Chief Operating Officer, and
Donald Ray Pate, Jr., our Executive Vice President for
ClassroomDirect.com (formerly named Re-Print), at a
price of $14.415 per share 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 Senior Credit
Facility.

     During fiscal 1999, net cash provided by operating
activities was $27.6 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
$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 Senior 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 was used to repay a portion of the $302.7
million borrowed under the Senior Credit Facility.
U.S. Office Products contributed capital of $8.1
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 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.

     During fiscal 1997, net cash provided by operating
activities was $918,000.  Net cash used in investing
activities was $16.7 million, including $7.7 million
for acquisitions, $7.2 million for additions to
property and equipment and $1.8 million to pay non-
recurring acquisition costs.  Net cash provided by
financing activities was $15.8 million, including $59.9
million provided by U.S. Office Products to fund the
cash portion of the purchase price and the repayment of
debt associated with the Fiscal 1997 Purchased
Companies and the payment of debt of the Pooled
Companies, partially offset by $46.9 million used for
the net repayment of indebtedness, primarily at the
Fiscal 1997 Purchased Companies.

     Our anticipated capital expenditures for the next
twelve months is approximately $10 million.  The
largest items include software development for our
Internet initiative, computer hardware and software and
warehouse equipment.

     We are currently considering, and have hired a
nationally known commercial real estate agent to
market, a sale and leaseback transaction involving four
distribution facilities in Ohio, Massachusetts, Kansas
and Texas.  We are currently seeking bids on these
properties for such a transaction.  We may sell all or
any number of these facilities or could substitute
other properties we own in this transaction.  We
believe that the current fair market value for these
distribution facilities is approximately $21 million
with net proceeds to us of approximately $20.3 million
which would be used to repay outstanding indebtedness

<PAGE>

under our Senior Credit Facility or for general
corporate purposes, including working capital and for
acquisitions.  If we determine to proceed with this
transaction, we expect that it will close in the second
quarter of fiscal 2000.

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 acquired 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 1999
and 1998 (in thousands).  We derived this data from
unaudited consolidated financial statements that, in
the opinion of our management, reflect all adjustments,
consisting only of normal recurring accruals, necessary
for a fair presentation of such quarterly information.
Revenues and profitability are significantly higher in
the months of May through October, with the most
significant portion of revenue and profit occurring in
the months of July through September.

                                   Year Ended April 24, 1999
                         First     Second      Third     Fourth      Total

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

                                    Year Ended April 25, 1998
                         First      Second      Third     Fourth      Total

Revenues              $87,029     $111,460    $49,391     $62,575   $310,455
Gross profit           30,337       37,225     16,213      23,810    107,585
Operating income
(loss)                 11,872       12,155     (4,048)     (3,731)    16,248
Net income (loss)       5,804        5,965     (2,934)     (3,596)     5,239
Per share amounts:
   Basic                 0.49         0.49      (0.20)      (0.24)      0.40
   Diluted               0.48         0.47      (0.20)      (0.24)      0.39

Inflation

     We do not believe that inflation has had a
material impact on our results of operations during the
fiscal years ended April 24, 1999, April 25, 1998 and
April 26, 1997.

Recent Accounting Pronouncements

     Reporting Comprehensive Income.  In June 1997, the
Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income."  SFAS
No. 130 establishes

<PAGE>

standards for the reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a
full set of general purpose financial statements.  SFAS No. 130
requires that all items that are required to be
recognized under accounting standards as components of
comprehensive income be reported in a financial
statement that is displayed with the same prominence as
other financial statements.  SFAS No. 130 is effective
for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier
periods provided for comparative purposes is required.
We adopted SFAS No 130 in fiscal 1999.  Implementation
of this disclosure standard did not affect our
financial position or results of operations.

     Disclosures About Segments.  In June 1997, FASB
issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information."  SFAS No. 131
establishes standards for the way that public business
enterprises report information about operating segments
in annual financial statements and requires that those
enterprises report selected information about operating
segments in interim financial reports issued to
shareholders.  It also establishes standards for
related disclosures about products and services,
geographic areas and major customers.  SFAS No. 131 is
effective for financial statements for fiscal years
beginning after December 15, 1997 and is presented in
this Annual Report.  Financial statement disclosures
for prior periods are required to be restated.
Implementation of this disclosure standard did not
affect our financial position or results of operations.

     Accounting for the Costs of Computer Software.  In
March 1998, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use."  SOP 98-1
requires computer software costs associated with
internal use software to be expensed as incurred until
certain capitalization criteria are met.  We adopted
SOP 98-1 during fiscal 1999.  Adoption of SOP 98-1 did
not have a material impact on our financial position or
results of operations.

     Accounting for Derivative Instruments and Hedging
Activities.  In June 1998, FASB issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging
Activities."  This statement, which is required to be
adopted for annual periods beginning after June 15,
2000, establishes standards for recognition and
measurement of derivatives and hedging activities.  We
will implement this statement in fiscal 2002 as
required.  The adoption of SFAS No. 133 is not expected
to have a material effect on our financial position or
results of operations.

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.
Because any disruption to our computerized order
processing and inventory systems could materially and
adversely affect our operations, we have established a
centrally managed, company wide plan to identify,
evaluate and address Year 2000 issues.  Although most
of our mission critical systems, network elements and
products were verified for Year 2000 compliance as of
the end of June 1999, we may still be susceptible to
Year 2000-related problems.  In addition, if our
suppliers, service providers and/or customers fail to
resolve their Year 2000 issues in an effective and
timely manner, our business could be significantly and
adversely affected.  We believe that some of our school
customers have not yet addressed or resolved their Year
2000 issues.

     We currently estimate that we will incur expenses
of approximately $100,000 through calendar 1999 in
connection with our anticipated Year 2000 efforts, in
addition to approximately $20,000 in expenses incurred
through April 24, 1999 for matters historically
identified as Year 2000-related.  The

<PAGE>

timing of expenses may vary and is not necessarily indicative of
readiness efforts or progress to date.  We also expect
to incur certain capital improvement costs (totaling
approximately $300,000) to support this project.  Such
capital costs are being incurred sooner than originally
planned, but, for the most part, would have been
required in the normal course of business.  We expect
to fund our Year 2000 efforts through operating cash
flows.  We will use our Senior Credit Facility for
capital improvements related to the effort.

     As part of our Year 2000 initiative, we are
evaluating scenarios that may occur as a result of the
century change and are in the process of developing
contingency and business continuity plans tailored for
Year 2000-related occurrences.  As noted earlier, we
are highly reliant on our computer order processing and
inventory systems to fill orders, bill the customer and
collect payments.  A loss of either of these systems
would cause long delays in filling and shipping
products, billing the customer and collecting accounts
receivable.  The highly seasonal nature of our business
does not allow for any delay in shipping products to
customers.  Although the seasonal nature of our
business would heighten any problems encountered, the
timing of the majority of our sales, shipping, billing
and collection efforts for fiscal 1999 will be complete
prior to the Year 2000.  We expect that any unforeseen
problems related to Year 2000 issues would be
identified within the months of January and February
2000, which is our slowest period.  We have identified
that we may experience certain inconveniences or
inefficiencies as a result of a supplier's failure to
remediate its Year 2000 issue.  We believe, however,
that most of our business will proceed without any
significant interruption.

Item 7A.  Quantitative and Qualitative Disclosure About
Market Risk

     Our financial instruments include cash, accounts
receivable, accounts payable 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 24, 1999.

     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 Senior 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 24, 1999.


<PAGE>


Item 8.  Financial Statements and Supplementary Data

       REPORT OF INDEPENDENT PUBLIC 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) present fairly, in all material respects, the
financial position of School Specialty, Inc. and its
subsidiaries at April 24, 1999 and April 25, 1998, and
the results of their operations and their cash flows
for each of the three years in the period ended April
24, 1999, in conformity with generally accepted
accounting principles.  In addition, in our opinion,
the financial statement schedule listed in the index
appearing under Item 14(a)(2) 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 generally accepted auditing standards
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.

PricewaterhouseCoopers LLP

Minneapolis, Minnesota
May 28, 1999

<PAGE>

FINANCIAL STATEMENTS



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



                                                     April 24,     April 25,
                                                      1999          1998
   ASSETS
Current assets:
 Cash and cash equivalents                          $  9,779       $      -
 Accounts receivable, less allowance for doubtful
 accounts of $2,234 and $716, respectively            74,781         38,719
 Inventories                                          78,783         49,307
 Prepaid expenses and other current assets            27,044         13,503
   Total current assets                              190,387        101,529

Property and equipment, net                           42,305         22,587
Intangible assets, net                               201,206         99,613
Deferred income tax asset                              3,810              -
   Total assets                                     $437,708       $223,729

   LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Short-term payable to U.S. Office Products         $      -        $20,277
 Current portion - long term debt                     11,594             11
 Accounts payable                                     37,050         23,788
 Accrued compensation                                  8,410          4,458
 Accrued income taxes                                  4,193              -
 Accrued restructuring                                 2,752            472
 Other accrued liabilities                             9,194          4,732
   Total current liabilities                          73,193         53,738

Long-term debt                                       161,691            315
Long-term payable to U.S. Office Products                  -         62,699
Other                                                    137            511
   Total liabilities                                 235,021        117,263

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 17,229,197 issued and outstanding                   17              -
 Capital paid-in excess of par value                 192,196              -
 Divisional equity                                         -        104,883
 Accumulated other comprehensive income                   (5)             -
 Retained earnings                                    10,479          1,583
   Total stockholders' equity                        202,687        106,466
   Total liabilities and stockholders' equity       $437,708       $223,729



          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 24,      April 25,        April 26,
                                   1999            1998             1997

Revenues                          $ 521,704       $ 310,455       $ 191,746
Cost of revenues                    341,783         202,870         126,862
   Gross profit                     179,921         107,585          64,884
Selling, general and
 administrative expenses            144,659          87,846          53,177
Restructuring costs                   4,200           2,491             194
Strategic restructuring costs         1,074           1,000               -
Non-recurring acquisition costs           -               -           1,792
   Operating income                  29,988          16,248           9,721
Other (income) expense:
 Interest expense                    12,735           5,505           4,197
 Interest income                       (134)           (132)              -
 Other                                 (228)            156            (196)
Income before provision for
(benefit from)
  income taxes                       17,615          10,719           5,720
Provision for (benefit from)
  income taxes                        8,719           5,480          (2,412)
Net income                         $  8,896        $  5,239        $  8,132


Weighted average shares outstanding:
 Basic                               14,690           13,284         10,003
 Diluted                             14,840           13,547         10,196

Net income per share:
 Basic                             $   0.61         $   0.40       $   0.81
 Diluted                           $   0.60         $   0.39       $   0.80




   See accompanying notes to consolidated financial statements.


<PAGE>


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

                                         Capital                 Accumulated                    Total
                                         Paid-in                    Other          Retained   Stockholders       Total
                       Common Stock      Excess     Divisional   Comprehensive    (Deficit)    (Deficit)      Comprehensive
                    Shares   Dollars    Par value     Equity     Income (Loss)     Earnings     Equity        Income (Loss)
                     <S>      <C>        <C>           <C>          <C>              <C>          <C>              <C>
Balance at April
30, 1996              -       $ -        $   -      $ 7,487        $    -         $ (11,754)    $ (4,267)
Transactions of
Pooled Companies:
Exercise of
 warrants and
 stock options        -         -            -        1,979             -               -          1,979
Retirement of
 treasury stock       -         -            -           34             -               (34)           -
Issuances of U.S.
 Office Products
 common stock in
 conjunction with
 acquitions           -         -            -       10,485             -                -        10,485
Net income            -         -            -            -             -            8,132         8,132         8,132
Total comprehensive
 income                                                                                                          8,132
Balance at April
26, 1997              -         -            -       19,985             -           (3,656)       16,329
Issuances of U.S.
 Office Products
 common stock in
 conjunction with
 acqutions            -         -            -        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               -             -
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 acquitions    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                                                                                                        $ 8,887
Balance at April
24, 1999        17,229      $ 17      $192,196         $  -           $ (5)        $10,479      $202,687

</TABLE>


   See accompanying notes to consolidated financial statements.

<PAGE>
                    SCHOOL SPECIALTY, INC.
              CONSOLIDATED STATEMENT OF CASH FLOWS
                       (In Thousands)
<TABLE>
<CAPTION>
                                                 For the Fiscal Year Ended
                                            April 24,        April 25,      April 26,
                                             1999             1998           1997
                                             <S>              <C>             <C>
Cash flows from operating activities:
  Net income                               $  8,896       $  5,239       $  8,132
  Adjustments to reconcile net
   income to net cash provided by
   (used in) operating activities:
     Depreciation and
      amortization expense                    9,604          4,561          2,106
     Non-recurring acquisition costs              -              -          1,792
     Restructuring costs                      5,274          2,491            194
     Amortization of loan fees                  527              -              -
     Other                                      235             78            115
     Changes in current assets and
      liabilities (net of assets acquired
      and liabilities assumed in
      business combinations accounted
      for under the purchase method):
       Accounts receivable                   13,583        (3,586)          1,277
       Inventory                              1,374        (6,666)          2,737
       Prepaid expenses and other
        current assets                       (2,354)         (717)         (2,361)
       Accounts payable                     (12,591)        5,256          (6,969)
       Accrued liabilities                    3,075        (2,932)         (6,105)
          Net cash provided by
           operating activities              27,623         3,724             918
Cash flows from investing activities:
 Cash paid in acquisitions,
  net of cash received                     (122,337)      (95,670)         (7,734)
 Additions to property and equipment         (4,872)       (3,558)         (7,216)
 Payments of non-recurring
  acquisition costs                               -             -          (1,792)
 Other                                          (27)         (514)              -
      Net cash used in
       investing activities                (127,236)      (99,742)        (16,742)
Cash flows from financing activities:
  Payments of long-term debt               (241,145)       (6,270)        (16,962)
  Payments of short-term debt               (20,277)       (2,102)        (29,908)
  Advances from (payments to)
   U.S. Office Products                     (62,699)       23,058          59,919
  Capital contribution by
   U.S. Office Products                       7,217        81,332               -
  Proceeds from issuance of
   common stock                              73,556             -           1,979
 Proceeds from issuance of
  long-term debt                            355,700             -             750
 Capitalized loan fees                       (2,960)            -               -
      Net cash provided by
       financing activities                 109,392        96,018          15,778
Net increase (decrease) in
 cash and cash equivalents                    9,779             -             (46)
Cash and cash equivalents at
 beginning of period                              -             -              46
Cash and cash equivalents
 at end of period                          $  9,779      $      -         $     -
Supplemental disclosures of
 cash flow information:
  Interest paid                            $ 11,151      $     35         $   456
  Income taxes paid (refunded)             $  5,123      $  1,148         $  (132)

</TABLE>
<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 24, 1999, April 25, 1998 and April 26, 1997.  The
fair  values  of  the  assets and  liabilities  of  the
acquired companies at the dates of the acquisitions are
presented as follows:



                                           For the Fiscal Year Ended
                                  April 24,        April 25,      April 26,
                                   1999              1998          1997

Accounts receivable               $ 49,645          $ 17,900      $  5,381
Inventories                         30,850            18,180         6,922
Prepaid expenses and
  other current assets              11,142             2,431         2,371
Property and equipment              21,033             6,379         1,155
Intangible assets                  103,455            80,359        14,248
Other assets                         3,775               346            29
Short-term debt                       (832)           (1,850)       (4,283)
Accounts payable                   (25,853)           (9,400)       (4,012)
Accrued liabilities                 (7,564)           (9,089)       (1,846)
Long-term debt                     (57,599)           (6,020)       (1,746)
Other liabilities                     (228)                -             -
   Net assets acquired            $127,824          $ 99,236       $ 18,219

The acquisitions were
 funded as follows:
Common stock                       $ 5,487          $      -        $      -
U.S. Office Products common stock        -             3,566          10,485
Cash paid, net of cash acquired    122,337            95,670           7,734
   Total                          $127,824          $ 99,236        $ 18,219


Noncash transactions:

   During fiscal 1999, the Company issued 12,204 shares
of Company Common Stock to the shareholders of U.S.
Office Products Company under the School Specialty,
Inc. Distribution.




   See accompanying notes to consolidated financial statements.

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)

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.

      The Education Division was created by U.S. Office
Products in May 1996 in connection with the acquisition
of  School  Specialty,  Inc., a  Wisconsin  corporation
("Old  School").  This  business  combination  and  the
acquisition   in  July  1996  of  The  Re-Print   Corp.
("Re-Print")    were   accounted    for    under    the
pooling-of-interests method (Old  School  and  Re-Print
are herein referred to as the "Pooled Companies"). As a
result  of  these business combinations being accounted
for  under the pooling-of-interests method, the results
of the Company prior to the completion of such business
combinations  represent  the combined  results  of  the
Pooled   Companies  operating  as  separate  autonomous
entities.


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, 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.

Definition of Fiscal Year

     As used in these consolidated financial statements
and related notes to consolidated financial statements,
"fiscal 1999", "fiscal 1998" and "fiscal 1997" refer to
the  Company's fiscal years ended April 24, 1999, April
25, 1998 and April 26, 1997, respectively.

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousnads, Except Per Share Amounts)


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  25  to  40 years for buildings and its components
and   3  to  15  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
40  years,  except  for  goodwill  associated  with   a
software  subsidiary which is being amortized  over  15
years.    Identifiable   intangible   assets    include
trademarks  and  software and are being amortized  over
their  estimated  useful  lives  ranging  from  one  to
fifteen 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
if  its assets, then intangible 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 24, 1999.

Fair Value of Financial Instruments

      The  carrying amounts of the Company's  financial
instruments   including  cash  and  cash   equivalents,
accounts  receivable  accounts payable,  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

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)


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.

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 24, 1999,
April  25,  1998  and April 26, 1997 and  was  $10,408,
$6,934, and $3,621, 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.

Non-Recurring Acquisition Costs

        Non-recurring   acquisition   costs   represent
acquisition  costs incurred by the Company in  business
combinations      accounted     for      under      the
pooling-of-interests  method.   These   costs   include
accounting,  legal, and investment banking  fees,  real
estate  and  environmental assessments and  appraisals,
and   various   regulatory  fees.  Generally   accepted
accounting  principles require the Company  to  expense
all  acquisition costs (both those paid by the  Company
and   those  paid  by  the  sellers  of  the   acquired
companies)  related to business combinations  accounted
for under the pooling-of-interests method.

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)


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)".

Strategic Restructuring Costs

       Strategic  restructuring  costs  represent   the
Company's portion of the costs incurred by U.S.  Office
Products   as   a  result  of  U.S.  Office   Products'
comprehensive restructuring.

New Accounting Pronouncement

      In  June  1998,  the  FASB  issued  Statement  of
Financial   Accounting  Standards  ("SFAS")   No.   133
"Accounting  for  Derivative  Instruments  and  Hedging
Activities".  This statement, which is required  to  be
adopted  for  annual periods beginning after  June  15,
2000,   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.

Distribution Ratio

      On June 9, 1998, the Company issued approximately
12.2  million 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

Purchase Method

     In fiscal 1999, the Company made five acquisitions
accounted  for  under  the  purchase  method   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
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.

      In fiscal 1997, the Company made six acquisitions
accounted  for  under  the  purchase  method   for   an
aggregate  purchase  price of  $18,219,  consisting  of
$7,734  of  cash and U.S. Office Products common  stock
with  a  market  value  of $10,485.  The  total  assets
related   to  these  six  acquisitions  were   $30,106,
including  goodwill of $14,248. 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  24, 1999 and April  25,  1998  and
includes    the   Company's   consolidated    financial
statements and the results of the companies

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)

acquired in fiscal 1999 and fiscal 1998 purchase acquisitions
as if all such  purchase acquisitions had been made  at  the
beginning  of fiscal 1998. 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:

                                             For the Fiscal Year Ended
                                        April 24,               April 25,
                                         1999                    1998

Revenues                                $617,404                $614,041
Net income                                10,248                   5,997

Net income per share:
  Basic                                  $  0.58                 $  0.33
  Diluted                                $  0.58                 $  0.32

      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 1998 or the results which may occur  in  the
future.

Pooling-of-Interests Method

     In fiscal 1997, the Company issued 4,258 shares of
U.S. Office Products common stock to acquire the Pooled
Companies.  The  Pooled Companies  and  the  number  of
shares issued are as follows:
                                                          Number of
Company Name                                             Shares Issued

School Specialty, Inc.                                       2,308
Re-Print                                                     1,950
   Total shares issued                                       4,258

      The  Company's consolidated financial  statements
give  retroactive  effect to the  acquisitions  of  the
Pooled Companies for all periods presented.

      The  following presents the separate results,  in
each   of   the  periods  presented,  of  the   Company
(excluding the results of Pooled Companies prior to the
dates  on  which  they were acquired), and  the  Pooled
Companies up to the dates on which they were acquired:

                                                           Pooled
                                              Company     Companies   Combined
For the year ended April 26, 1997
 Revenues                                   $181,420      $ 10,326    $191,746
 Net income                                    7,791           341       8,132


NOTE 5-RESTRUCTURING COSTS

      During  the  fourth quarter of fiscal  1998,  the
Company incurred restructuring costs of $2,491.   These
costs   represent  the  expected  external  costs   and
liabilities to close redundant facilities and severance
costs. This restructuring plan was completed at the end
of fiscal year 1999.

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)


     During  the  second quarter of fiscal  1999,  the
Company incurred restructuring costs of $4,200.   These
costs   result  from  the  consolidation  of   existing
warehousing,  customer  service  and  sales  operations
following a significant fiscal 1999 acquisition.  Under
this   restructuring  plan,  the  Company  expects   to
eliminate approximately 240 jobs.  The following  table
sets  forth  the Company's accrued restructuring  costs
for  the  periods ended April 26, 1997, April 25,  1998
and April 24, 1999:

                            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                   (225)       (1,247)         (448)    (1,920)
Balance at April 24, 1999    $ 1,075      $  1,067       $   610    $ 2,752


NOTE 6-PREPAID EXPENSES AND OTHER CURRENT ASSETS

      Prepaid expenses and other current assets consist of the following:

                                                   April 24,       April 25,
                                                    1999            1998

Deferred catalog costs                             $13,203          $ 7,206
Deferred income taxes                                8,371            1,886
Notes receivable                                     1,513            1,558
Other                                                3,957            2,853
 Total prepaid expenses and other current assets   $27,044          $13,503

      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 24,        April 25,
                                                   1999             1998

Land                                              $  1,921          $  1,144
Projects in progress                                 1,607                34
Buildings                                           24,024            10,064
Furniture and fixtures                              12,283             6,725
Warehouse equipment                                 10,053             7,052
Leasehold improvements                               4,368             3,341
                                                    54,256            28,360
Less: Accumulated depreciation                     (11,951)           (5,773)
Net property and equipment                         $42,305           $22,587

      Depreciation expense for the fiscal  years  ended
April  24, 1999, April 25, 1998 and April 26, 1997  was
$4,948, $2,500 and $1,540, respectively.

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)

NOTE 8-INTANGIBLE ASSETS

     Intangible assets consist of the following:

                                                    April 24,       April 25,
                                                     1999            1998

Goodwill                                            $198,264         $102,487
Trademarks                                             3,669                -
Software                                               4,347                -
Other                                                  4,824            2,487
                                                     211,104          104,974
Less: Accumulated amortization                        (9,898)          (5,361)
   Net intangible assets                            $201,206         $ 99,613

      Amortization expense for the fiscal  years  ended
April  24, 1999, April 25, 1998 and April 26, 1997  was
$4,656, $2,061, and $566, respectively.


NOTE 9-CREDIT FACILITIES

Long-Term Debt

     Long-term debt consists of the following:
                                                       April 24,    April 25,
                                                        1999         1998

Senior credit facility                                  $172,500     $     -
Other                                                          -         310
Capital lease obligations                                    785          16
                                                         173,285         326
Less: Current maturities of long-term debt               (11,594)        (11)
   Total long-term debt                                 $161,691     $   315

      On September 30, 1998, the Company entered into a
five  year secured $350,000 senior credit facility (the
"Credit   Facility")  with  a  syndicate  of  financial
institutions,  led  by  NationsBank,  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 will accrue
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 24, 1999.  At April  24,
1999  the balance outstanding under the Credit Facility
was   $172,500,   including   $75,000    and    $97,500
outstanding   under  the  revolving  and  term   loans,
respectively, and included eight eurodollar  contracts,
expiring  within  25  days,  totaling  $172,500  at  an
average  interest rate of 6.69% (excluding the  effects
of  the  interest rate swap agreement disclosed below).
The  effective interest rate under the Credit  Facility
for  fiscal 1999 was 7.91%, which includes loan fee and
loan discount amortization.

      On  October 28, 1998 the Company entered into  an
interest rate swap agreement 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
24, 1999 was 4.91%.

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)

Maturities of Long-Term Debt

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

          2000                                                    $11,594
          2001                                                     15,284
          2002                                                     18,840
          2003                                                     30,067
          2004                                                     97,500
          Total maturities of long-term debt                     $173,285

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  short  -and  long-term  payable
amounts due U.S. Office Products.

      The long-term payable at April 25, 1998 and April
26,  1997 to U.S. Office Products primarily represented
payments made by U.S. Office Products on behalf of  the
Company  and  a  reasonable allocation by  U.S.  Office
Products  of  certain general corporate  expenses.   An
analysis of the activity in this account is as follows:

Balance at April 26, 1997                                          $33,226
 Payments of long-term debt of acquired companies                      822
 Funding of acquisitions and payment of acquisition costs           20,706
 Allocated corporate expenses                                        7,145
 Normal operating costs paid by U.S. Office Products                   800
Balance at April 25, 1998                                           62,699
 Repayment of long-term debt                                       (62,699)
Balance at April 24, 1999                                          $     -

      The average outstanding long-term payable to U.S.
Office Products during the fiscal years ended April 24,
1999  and  April  25,  1998  was  $6,871  and  $52,207,
respectively.

      Interest was allocated to the Company 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, $5,414 and $3,839 during
the  fiscal years ended April 24, 1999, April 25,  1998
and April 26, 1997, respectively.

NOTE 10-INCOME TAXES

     The provision for income taxes consists of:

                                                  For the Fiscal Year Ended
                                             April 24,   April 25,   April 26,
                                              1999        1998        1997
Income taxes currently payable:
 Federal                                    $ 6,511      $ 3,646      $   71
 State                                        1,740          907          99
                                              8,251        4,553         170
Deferred income tax expense (benefit)           468          927      (2,582)
  Total provision for (benefit from)
    income taxes                            $ 8,719      $ 5,480     $(2,412)

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)

Deferred taxes are comprised of the following:
                                                       April 24,    April 25,
                                                        1999         1998
Current deferred tax assets:
 Inventory                                             $  4,008     $    743
 Allowance for doubtful accounts                            858          164
 Net operating loss carryforward                          1,574          851
 Accrued liabilities                                        820          128
 Accrued restructuring                                    1,111            -
   Total current deferred tax assets                      8,371        1,886

Long-term deferred tax assets (liabilities):
Net operating loss carryforward                           4,694            -
Property and equipment                                     (476)        (591)
Intangible assets                                          (408)          80
   Total long-term deferred tax assets (liabilities)      3,810         (511)
   Net deferred tax assets                             $ 12,181      $ 1,375

      At  April  30, 1996, the valuation allowance  had
been  recorded,  related to deferred tax  assets  of  a
Pooled   Company,   including   net   operating    loss
carryforwards. Based upon the improved profitability of
this  Pooled Company during fiscal 1997, the  valuation
allowance  was  reversed, resulting in a  benefit  from
income taxes.

      The  Company has net operating loss carryforwards
of  approximately  $15,669, on  a  consolidated  basis,
which  expire  during  fiscal  years  2010-2018.    The
carryforwards are also subject to an annual  limitation
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 24,   April 25,   April 26,
                                             1999        1998        1997
U.S. federal statutory rate                  35.0%       34.0%       35.0%
State income taxes, net of federal
 income tax benefit                           5.2         6.6         1.0
Reversal of valuation allowance                 -           -       (84.8)
Nondeductible goodwill                        6.5         6.0         1.6
Nondeductible acquisition costs                 -         3.3         5.0
Other                                         2.8         1.2           -
Effective income tax rate                    49.5 %      51.1%      (42.2)%

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)

NOTE 11-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 capital  and
operating leases are as follows:
                                                        Capital     Operating
                                                        Leases        Leases
     2000                                               $  451       $4,186
     2001                                                  244        3,743
     2002                                                   31        2,923
     2003                                                   23        1,863
     2004                                                   23        1,466
     Thereafter                                            115        3,981
     Total minimum lease payments                          887      $18,162
     Less: Amounts representing interest                   102
     Present value of net minimum lease payments        $  785

Rent expense for the fiscal years ended April 24, 1999,
April  25,  1998 and April 26, 1997 was $4,498,  $3,389
and $1,817, 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 in
respect of 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  he  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.

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 24,
1999 or April 25, 1998 related to these agreements,  as
no change of control has occurred.

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)

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  and  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 joint and  several.
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 1999 the  Company's  matching
contribution  expense was $416. 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 have, or  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.

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)

NOTE 14-STOCKHOLDERS' EQUITY

Earnings Per Share

      In  February 1997, the FASB issued SFAS No.  128,
"Earnings   Per  Share".   SFAS  No.  128   establishes
standards  for  computing and presenting  earnings  per
share   ("EPS").   SFAS  No.  128  requires  the   dual
presentation of basic and diluted EPS on  the  face  of
the   consolidated  statement  of  income.   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
common  stock.  The Company adopted SFAS No. 128 during
fiscal 1998 and has restated all prior period EPS data.
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 1999:
 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:
 Basic EPS                                $ 5,239        13,284        $ 0.40
 Effect of dilutive employee
  stock options                                 -           263
 Diluted EPS                              $ 5,239        13,547        $ 0.39

Fiscal 1997:
 Basic EPS                                $ 8,132        10,003        $ 0.81
 Effect of dilutive employee
  stock options                                 -           193
 Diluted EPS                              $ 8,132        10,196        $ 0.80

      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 15, 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
$2,412.

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

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)

ownership interests in
the Company.  The maximum number of options to purchase
common stock granted in any fiscal year under the Plan,
is equal to 20% of the Company's outstanding common
stock.  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 have equaled
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 123, 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 24,     April 25,     April 26,
                                         1999          1998          1997
Net income (loss):
  As reported                            $8,896        $5,239        $8,132
  Pro Forma                              (1,737)        4,436         7,383

Net income (loss) per share:
  As reported:
   Basic                                $  0.61       $  0.40       $  0.81
   Diluted                              $  0.60       $  0.39       $  0.80

   Pro Forma:
    Basic                                $(0.12)      $  0.33       $  0.74
    Diluted                              $(0.12)      $  0.33       $  0.72

  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 25,    April 24,   April 26,
                                           1999         1998        1997

     Expected life of option               7 years      7 years      7 years
     Risk free interest rate                 5.50%        6.35%        6.66%
     Expected volatility of stock           59.00%       44.10%       44.00%

  The weighted-average fair value of options granted
was $10.23, $9.75 and $15.31 for fiscal 1999, 1998, and
1997, respectively.

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)

  A summary of option transactions follows:


                                Options Outstanding       Options Exercisable
                                         Weighted-                  Weighted-
                                          Average                    Average
                                          Exercise                   Exercise
                               Option      Price           Options    Price
 Balance at April 30, 1996
   Granted                        225     $27.03
   Canceled                       (14)     28.37
 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


  The following table summarizes information about
  stock options outstanding at April 24, 1999:

                           Options Outstanding           Options Exercisable

                                              Weighted-              Weighted-
                                   Weighted-  Average                Average
                                   Average    Exercise               Exercise
Range of Exercise Price   Options   Life       Price      Options     Price

   $15.50 - $22.18         2,231    9.11       $16.05       50        $18.01
   $24.38 - $29.43           135    7.16        27.39       68         27.39
                           2,366    9.00       $16.70      118        $23.39


     Options granted to employees 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 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.

  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 are 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.

<PAGE>

                    SCHOOL SPECIALTY, INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)

NOTE 15---SEGMENT INFORMATION

      The  Company's business activities are  organized
around its two principal business segments, Traditional
and  Specialty  school  Business.   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 two segments serve a similar customer base, notable
differences exist in products, gross margin and revenue
growth   rate.    Products   distributed   within   the
Traditional   business   segment   include    classroom
supplies,  instructional materials, educational  games,
art   supplies,  school  forms,  educational  software,
school  furniture,  and indoor and  outdoor  equipment.
Products  distributed  within  the  Specialty  business
segment  target specific educational disciplines,  such
as  art, industrial arts, physical education, sciences,
library  and  early  childhood.   The  following  table
presents segment information:


                                              1999         1998        1997
Revenues:
 Traditional                                $329,325     $201,770    $157,130
 Specialty                                   192,379      108,685      34,616
   Total                                    $521,704     $310,455    $191,746

Operating Profit and Pretax Profit: (a)
 Traditional                                 $19,849      $10,348      $9,185
 Specialty                                    18,127       11,054       3,966
   Total                                      37,976       21,402      13,151
 General Corporate Expense                     2,714        1,663       1,444
 One Time Charges                              5,274        3,491       1,986
 Interest Expense and Other                   12,373        5,529       4,001
Income Before Taxes                          $17,615      $10,719    $  5,720

Identifiable Assets (at year end):
 Traditional                                $249,225     $121,475    $ 66,287
 Specialty                                   165,275       98,252      16,329
   Total                                     414,500      219,727      82,616
 Corporate Assets                             23,163        4,002       5,069
   Total                                    $437,663     $223,729     $87,685

Depreciation and Amortization:
 Traditional                                 $ 5,937      $ 2,433     $ 1,558
 Specialty                                     2,879        1,814         296
   Total                                       8,816        4,247       1,854
 Corporate                                       788          314         252
   Total                                     $ 9,604      $ 4,561     $ 2,106

Expenditures for Property and Equipment:
 Traditional                                 $ 1,923      $ 2,847     $ 5,819
   Specialty                                   2,327          447         746
   Total                                       4,250        3,294       6,565
 Corporate                                       622          264         651
   Total                                     $ 4,872      $ 3,558     $ 7,216

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

<PAGE>

                    SCHOOL SPECIALTY , INC.
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (In Thousands, Except Per Share Amounts)


NOTE 16-QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following presents certain unaudited quarterly
financial data for fiscal 1999 and fiscal 1998:


                                    Fiscal Year Ended April 24, 1999
                             First    Second     Third      Fourth    Total

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


                                     Fiscal Year Ended April 25, 1998
                              First    Second     Third      Fourth    Total

Revenues                    $87,029  $111,460    $ 49,391   $62,575  $310,455
Gross profit                 30,337    37,225      16,213    23,810   107,585
Operating income (loss)      11,872    12,155      (4,048)   (3,731)   16,248
Net income (loss)             5,804     5,965      (2,934)   (3,596)    5,239
Per share amounts:
   Basic                     $ 0.49    $ 0.49     $ (0.20)   $(0.24)   $ 0.40
   Diluted                   $ 0.48    $ 0.47     $ (0.20)   $(0.24)   $ 0.39

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-SUBSEQUENT EVENTS

      On  May  17,  1999  the Company  purchased  Audio
Graphics Systems for $1,089 of cash and $1,088 of stock
for a total purchase price of $2,177.

      On May 17, 1999 the underwriters of the Company's
secondary   offering  exercised  their  over  allotment
option  for 151,410 shares of Company stock  at  $17.25
per share for net proceeds of $2,412.

<PAGE>

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 September 2, 1999 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 September 2, 1999
          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 September 2, 1999 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 September 2, 1999 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 September 2, 1999 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 Public Accountants

          Consolidated Balance Sheet as of April 24, 1999 and April 25, 1998

          Consolidated Statement of Operations for the fiscal years
          ended April 24, 1999, April 25, 1998 and April 26, 1997

          Consolidated Statement of Stockholders'
          Equity (Deficit) for the fiscal years ended
          April 24, 1999, April 25, 1998 and April 26, 1997

          Consolidated Statement of Cash Flows for the fiscal years
          ended April 24, 1999, April 25, 1998 and April 26, 1997

          Notes to Consolidated Financial Statements

(a)(2)    Financial Statement Schedule.

          Schedule for the fiscal years ended April 24, 1999, April 25, 1998
          and April 26, 1997:  Schedule II - Valuation and Qualifying Accounts.

(a)(3)    Exhibits.

          See (c) below.

(b)       Reports on Form 8-K.

          During the last quarter of the fiscal year covered
          by this report, we filed a Current Report on Form
          8-K on February 24, 1999 reporting Items 2 and 7
          of such Form with respect to our acquisition of
          Sportime, LLC on February 9, 1999.  We filed a
          Current Report on Form 8-K/A on April 26, 1999 to
          include the financial statements listed in Item 7
          relating to this acquisition.

(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 12, 1999.

                                   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 Donald
J. Noskowiak, 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 12, 1999
----------------------      Executive Officer) and Dircetor
Daniel P. Spalding

/s/ Donald J. Noskowiak     Chief Financial Officer (Principal   July 12, 1999
-----------------------     Financial and Accounting Officer)
Donald J. Noskowiak

/s/ David J. Vander Zanden  President, Chief Operating Officer   July 12, 1999
--------------------------  and Director
David J. Vander Zanden

/s/ Jonathan J. Ledecky      Director                            July 12, 1999
-----------------------
Jonathan J. Ledecky

/s/ Rochelle Lamm Wallach    Director                            July 12, 1999
-------------------------
Rochelle Lamm Wallach

/s/ Leo C. McKenna           Director                            July 12, 1999
-------------------
Leo C. McKenna

/s/ Jerome M. Pool           Director                            July 12, 1999
------------------
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 April 29, 1996 between Daniel P. Spalding
         and School Specialty, Inc. 3
10.6     Employment Agreement dated July 26, 1996 between Donald Ray Pate, Jr.
         and The Re-Print Corp. 3
10.7(a)  Employment Agreement dated June 27, 1997 between Richard H. Nagel
         and Sax Arts and Crafts, Inc. 3
10.7(b)  Covenant Not to Compete Agreement dated June 27, 1997 between
         Richard H. Nagel and Sax Arts and Crafts, Inc. 7
10.8     Employment Agreement between David Vander Zanden and School
         Specialty, Inc. 4
10.9     Employment Agreement between School Specialty, Inc. and
         Jonathan J. Ledecky. 4
10.10    Amended Services Agreement dated as of June 8, 1998 between
         U.S. Office Products and Jonathan J. Ledecky. 5
10.11    Amended and Restated 1998 Stock Incentive Plan. 6
10.12    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. 6

<PAGE>
Exhibit
Number  Document Description

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 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.

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

5 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.

6 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.

7 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.