SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 11-K
______________________________
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1999, and the
period June 10, 1998 through December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission File No. 000-24385
A. Full title of the plan and address of the plan, if
different from that of the issuer named below:
SCHOOL SPECIALTY, INC.
401(k) Plan
B. Name of issuer of the securities held pursuant to
the plan and the address of its principal
executive office:
SCHOOL SPECIALTY, INC.
1000 N. Bluemound Avenue
Appleton, Wisconsin 54914
<PAGE>
SCHOOL SPECIALTY, INC.
401(K) PLAN
December 31, 1999 and 1998
FINANCIAL STATEMENTS
With Report of Independent Accountants
<PAGE>
SCHOOL SPECIALTY, INC.
401(K) PLAN
TABLE OF CONTENTS
Page
Report of Independent Accountants 2
Statements of Net Assets Available for Benefits 3
Statements of Changes in Net Assets Available for Benefits 4
Notes to Financial Statements 5
Supplemental Information Furnished Pursuant to the
Department of Labor's Rules and Regulations:
Schedule of Assets Held for Investment Purposes 9
Other Schedules are Omitted Due to the Absence of
Conditions Under which they are Required
Exhibit - Consent of Independent Accountants 10
Signatures 11
<PAGE>
Report of Independent Accountants
To the Participants and Administrator of
School Specialty, Inc. 401(k) Plan
In our opinion, the accompanying statements of net
assets available for benefits and the related
statements of changes in net assets available for
benefits present fairly, in all material respects, the
net assets available for benefits of School Specialty,
Inc. 401(k) Plan (the "Plan") at December 31, 1999 and
the changes in net assets available for benefits for
the year ended December 31, 1999 in conformity with
accounting principles generally accepted in the United
States. These financial statements are the
responsibility of the Plan's management; our
responsibility is to express an opinion on these
financial statements based on our audit. We conducted
our audit of these statements in accordance with
auditing standards generally accepted in the United
States, which require that we plan and perform the
audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used
and significant estimates made by management, and
evaluating the overall financial statement
presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above. The
financial statements of the Plan as of December 31,
1998 and for the period from June 10, 1998 through
December 31, 1998 were audited by other independent
accountants whose report dated August 6, 1999 expressed
an unqualified opinion on those statements.
Our audit was conducted for the purpose of forming an
opinion on the basic financial statements taken as a
whole. The supplemental schedule of assets held for
investment purposes as of December 31, 1999 is
presented for the purpose of additional analysis and is
not a required part of the basic financial statements
but is supplementary information required by the
Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. This supplemental
schedule is the responsibility of the Plan's
management. The supplemental schedule has been
subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a
whole.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, MN
April 7, 2000
<PAGE>
SCHOOL SPECIALTY, INC.
401(K) Plan
Statements of Net Assets Available for Benefits
December 31, 1999 and 1998
1999 1998
ASSETS
Investments $32,840,917 $12,470,950
Receivables:
Employer contribution 503,231 185,587
Employee contributions 191,631 -
Transfer from other plan 293,598 -
----------- -----------
Total 988,460 185,587
----------- -----------
Total assets 33,829,377 12,656,537
LIABILITIES - -
----------- -----------
Net assets available for benefits $33,829,377 $12,656,537
=========== ===========
See accompanying notes to financial statements.
<PAGE>
SCHOOL SPECIALTY, INC.
401(K) Plan
Statements of Changes in Net Assets Available for Benefits
Period June 10, 1998
Year Ended through
December 31, 1999 December 31, 1998
Additions:
Investment income:
Interest and dividends $ 290,488 $ 56,557
Net appreciation in fair value
of investments 4,915,752 655,638
---------- ----------
Net investment income 5,206,240 712,195
---------- ----------
Contributions:
Rollovers 1,687,909 52,287
Employer 503,231 186,416
Participants 3,139,036 1,109,739
---------- ----------
Total contributions 5,330,176 1,348,442
---------- ----------
Total additions 10,536,416 2,060,637
---------- ----------
Deductions:
Benefits paid to participants 3,643,845 262,803
Administrative expenses 11,554 2,624
---------- ----------
Total deductions 3,655,399 265,427
---------- ----------
Net increase 6,881,017 1,795,210
Net assets available for benefits,
beginning of period 12,656,537 -
Transfers from other plans 14,291,823 10,861,327
---------- ----------
Net assets available for benefits,
end of period $33,829,377 $12,656,537
=========== ===========
See accompanying notes to financial statements.
<PAGE>
SCHOOL SPECIALTY, INC.
401(K) Plan
Notes to Financial Statements
Note 1. Description of Plan
The School Specialty, Inc. 401(k) Plan (the
"Plan") is a defined contribution plan, which
covers substantially all employees of School
Specialty, Inc. (the "Company"), and its
subsidiaries.
The following description of the Plan provides
only general information. Participants should
refer to the Plan document for a more complete
description of the Plan's provisions.
Eligibility - Any active employee employed on
June 10, 1998, the effective date of the Plan,
became eligible to participate in the Plan
without regard to minimum age and service
requirements. Subsequent to June 10, 1998, an
employee becomes eligible to participate in
the Plan on the first of the month, following
the completion of three months of service,
provided the employee is at least twenty-one
years of age. The Plan is subject to the
provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
Participant accounts - Each participant's
account is credited with the participant's
contribution, the Company's matching
contribution, and an allocation of the
Company's annual discretionary contribution
and Plan earnings. Allocations are based on
participant earnings or account balances, as
defined in the Plan. The benefit to which a
participant is entitled is the benefit that
can be provided from the participant's
account.
Participant contributions - Participants
contribute up to 15% of eligible earnings as
defined in the Plan.
Employer contributions - Annually, the Company
contributes matching contributions equal to
25% of the first 6% of eligible earnings that
a participant contributes to the Plan.
Additionally, a discretionary contribution may
be contributed by the Company to the Plan at
the option of the Board of Directors.
Vesting - Each participant is immediately 100%
vested in his or her account balance.
Participant loans - Participants may borrow
from their account balances a minimum of
$1,000 up to a maximum equal to the lesser of
$50,000 or 50% of their account balance. Loan
terms range from 1-5 years except for the
purchase of a primary residence. The loans
are secured by the balance in the
participant's account and bear interest at
rates ranging from 7.0% to 10.0%, which are
commensurate with local prevailing rates as
determined by the plan administrator.
Principal and interest are paid ratably
through monthly payroll deductions
Investment options - Upon enrollment in the
Plan, participants may direct, in 1%
increments, funds in their account among a
diverse selection of CIGNA pooled separate
funds, CIGNA Charter Guaranteed Income Fund,
and School Specialty, Inc. common stock.
Participants may change their investment
directives daily.
<PAGE>
SCHOOL SPECIALTY, INC.
401(K) Plan
Notes to Financial Statements
Note 2. Summary of Significant Accounting Policies
Basis of accounting - The accounting records
of the Plan are maintained on an accrual
basis.
Investments - Investments, other than
participant loans and guaranteed accounts ,
are stated at fair value as determined by
available quoted market prices, which
represents the net asset value of shares held
by the Plan at year end. Participant loans
are valued at cost, which approximates fair
value. Guaranteed accounts are stated at
contract value, which approximates fair value.
Investment income is recorded by the plan as
earned or declared. Purchases and sales of
securities are recorded on a trade-date basis.
Payment of benefits - Benefits are recorded
when paid. At December 31, 1999, the vested
account balance of participants separated from
service was approximately $950,000.
Use of estimates - The preparation of
financial statements in conformity with
generally accepted accounting principles
requires management to make estimates and
assumptions that affect certain reported
amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Note 3. Investments
The following table presents the fair value of
investments at December 31, 1999 and 1998.
Individual investments that represent 5% or
more of the Plan net assets are separately
identified.
1999 1998
Guaranteed Accounts:
CIGNA Charter Guaranteed Income Fund $ 6,242,689 $ 2,848,492
Other - 3,241
Pooled Separate Funds:
CIGNA Lifetime 40 Fund 1,717,478 1,135,421
CIGNA Lifetime 30 Fund 1,521,522 1,447,294
Fidelity Advisor Growth Opportunities Fund 6,229,572 4,399,419
PBHG Growth Fund - 1,190,111
CIGNA Charter Large Company Stock
Index Fund 2,842,259 74,310
INVESCO Dynamics Fund 5,805,427 35,507
CIGNA Charter Small Company
Growth-Fiduciary Trust Fund 1,971,413 -
Other 5,985,737 1,231,170
Other Assets:
School Specialty, Inc. Common Stock 32,296 2,046
Participant Loans 492,524 103,939
----------- -----------
$32,840,917 $12,470,950
=========== ===========
<PAGE>
SCHOOL SPECIALTY, INC.
401(K) Plan
Notes to Financial Statements
Note 3. Investments (continued)
During the year ended December 31, 1999 and
the period June 10, 1998 through December 31,
1998, the Plan's investments (including
investments bought, sold and held during that
period) appreciated in value as follows:
1999 1998
Pooled Separate Funds:
CIGNA Lifetime 40 Fund $ 263,165 $ 40,203
CIGNA Lifetime 30 Fund 264,391 42,455
Fidelity Advisor Growth Opportunity Fund 265,933 435,240
PBHG Growth Fund 138,976 102,662
CIGNA Charter Large Company Stock
Index Fund 398,038 6,112
INVESCO Dynamics Fund 1,836,712 2,515
CIGNA Charter Small Company Growth Fund 600,688 -
Other 1,151,946 26,042
Other Assets:
School Specialty, Inc. Common Stock (4,097) 409
---------- --------
$4,915,752 $655,638
========== ========
Note 4. Administrative Expenses
The Company pays all costs incurred in the
administration of the Plan, except for loan
and benefit payment processing fees and other
miscellaneous charges, which are charged
directly to participant accounts.
Note 5. Party-in-Interest Transactions
A substantial portion of the Plan's assets are
invested in funds managed and sold by or
affiliated with CIGNA Retirement & Investment
Services (CIGNA), the investment manager of
the Plan. Purchases and sales of such funds
during the year ended December 31, 1999 and
the period June 10, 1998 through December 31,
1998 are as follows:
1999 1998
Total purchases $22,856,990 $ 9,998,285
Total sales 11,021,325 1,263,910
Note 6. Income Tax Status
Although the Plan has not requested
determination from the Internal Revenue
Service as to the Plan's tax-exempt status,
the master prototype plan from which the Plan
was drafted has received a favorable
determination from the IRS. Plan management
believes that the Plan is designed to operate
in accordance with all applicable provisions
of the Internal Revenue Code. Therefore,
management believes that the Plan is qualified
and that the related trust is exempt from
taxation under the Internal Revenue Code.
<PAGE>
SCHOOL SPECIALTY, INC.
401(K) Plan
Notes to Financial Statements
Note 7. Plan Termination
Although it has not expressed any intent to
do so, the Company has the right under the
Plan to terminate the Plan subject to the
provisions of ERISA.
Note 8. Transfers from Other Plans
On June 9, 1998, the Company was spun off
from U.S. Office Products. Account balances
of employees who participated in the
retirement savings plan sponsored by U.S.
Office Products and transferred to the Plan
were $86,290 and $10,861,327 during the year
ended December 31, 1999 and during the period
June 10, 1998 through December 31, 1998,
respectively.
During 1999, funds transferred into the Plan
from retirement savings plans of acquired
companies were $14,205,533.
<PAGE>
SCHOOL SPECIALTY, INC.
401(K) Plan
Schedule of Assets Held for Investment Purposes
December 31, 1999
Plan No. 002
EI# 39-0971239
Current
Description of Investment Value
Guaranteed Accounts:
CIGNA Charter Guaranteed Income Fund* $6,242,689
Pooled Separate Funds:
CIGNA Lifetime 60 Fund* 153,047
CIGNA Lifetime 50 Fund* 497,811
CIGNA Lifetime 40 Fund* 1,717,478
CIGNA Lifetime 30 Fund* 1,521,522
CIGNA Lifetime 20 Fund* 348,422
INVESCO Total Return Fund* 1,138,708
CIGNA Charter Large Company Stock Index Fund* 2,842,259
Fidelity Advisor Growth Opportunities Fund* 6,229,572
INVESCO Dynamics Fund* 5,805,427
Janus Worldwide Fund* 1,381,064
CIGNA Charter Growth and Income Fund* 399,358
CIGNA Large Company Growth - Putnam Fund* 1,165,685
CIGNA Small Company Growth - Fiduciary Trust Fund* 1,971,413
CIGNA Charter Foreign Stock II - Bank of Ireland Fund* 901,642
----------
26,073,408
----------
Other Assets:
School Specialty, Inc. Common Stock* 32,296
Participant Loans - due February 2000
through June 2033; interest ranging
from 7.0% to 10.0% 492,524
-----------
524,820
-----------
$32,840,917
===========
*Known to be party-in-interest.
<PAGE>
EXHIBIT
-------
SCHOOL SPECIALTY, INC.
401(K) Plan
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in
the Registration Statement on Form S-8 (No. 333-64193)
of School Specialty, Inc. of our report dated April 7,
2000 relating to the financial statements of School
Specialty, Inc. 401(K) Plan, which appears in this Form
11-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 26, 2000
<PAGE>
SCHOOL SPECIALTY, INC.
401(K) Plan
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Administrative Committee of the School
Specialty, Inc. 401(k) Plan has caused this annual
report to be signed by the undersigned thereunto duly
authorized.
SCHOOL SPECIALTY, INC.
401(k) PLAN
By: /s/ James W. Buhl
------------------------------------
James W. Buhl, School Specialty, Inc.
401(k) Plan Administrator
Date: June 26, 2000
