School Specialty (SCOO) 8-K School Specialty Reports Record Fiscal 2008 First Quarter Results

EXHIBIT 99.1

	FOR IMMEDIATE RELEASE
	TUESDAY, AUGUST 14, 2007
	Contact:
	Kevin Baehler	Mark Fleming
	VP / Interim CFO	Communications & Investor Relations
	920-882-5882	920-882-5646

W6316 Design Drive, Greenville, WI 54942

P.O. Box 1579, Appleton, WI 54912-1579

SCHOOL SPECIALTY REPORTS RECORD FISCAL 2008 FIRST QUARTER RESULTS

• Diluted EPS from continuing operations increases 16.9 percent to a record $1.87

• Revenue improves 2.5 percent to a record $386.5 million

• School Specialty Science curriculum offerings exceed expectations

• Fiscal 2008 revenue and earnings guidance confirmed

Greenville, WI, August 14, 2007—School Specialty (NASDAQ:SCHS), a leading education company providing supplemental learning products to the preK-12 market, today reported fiscal 2008 first quarter financial results. The Company reported record first quarter revenue, earnings and diluted earnings per share from continuing operations. Diluted earnings per share from continuing operations were $1.87, a 16.9 percent increase over the first quarter of fiscal 2007. Earnings from continuing operations rose $2.8 million to $40.6 million. Revenue improved to $386.5 million, a 2.5 percent increase over the same period last year.

“This year’s first quarter was the best ever for School Specialty,” said David J. Vander Zanden, Chief Executive Officer. “In spite of a slow start to the quarter, our associates delivered good overall growth, and we again improved our profit margins through cost reduction activities, supply-chain efficiencies and a continued shift in our revenue mix to the more profitable specialty products.”

The major highlight of the quarter was the Company’s success selling its science curriculum programs to schools across the country, with particularly strong activity in California’s statewide adoption process. “Our full-year revenue from the elementary science adoptions in California and South Carolina should exceed our prior estimates by about 50 percent, coming in at just over $30 million,” noted Vander Zanden. “We also had strong activity in the non-adoption ‘open territories,’ including New York City, where a majority of the schools selected our elementary science program. We are very encouraged by the broad acceptance of our core science curriculums, including our middle school offering. More educators than ever are recognizing the value of a hands-on, active-learning approach to science instruction, which is the foundation of our unique offerings.”

School Specialty has two core-curriculum science offerings: the Full Option Science System™ (FOSS^®) from subsidiary Delta Education (Grades K-5), andFocus on Earth, Life and Physical Science from subsidiary CPO Science (Grades 6-8).

The Company’s Essentials segment, which provides supplies and furniture to schools across the country, reported lower revenue for the first quarter, though there was an acceleration in order activity during the latter part of the quarter which has continued through the first half of August. Historical ordering patterns have been delayed due in part to many school districts that set later start dates for fall classes, allowing them to postpone orders for a few weeks. In addition, fourth quarter delays in furniture orders continued in the first quarter as many building projects moved to the final half of the Company’s fiscal year.

President and Chief Operating Officer Thomas M. Slagle said other factors also affected the Essentials business during the first quarter. “In last year’s fourth quarter we decided to discontinue an underperforming catalog and we walked away from some low-margin bids, which with the order delays, impacted first quarter results,” noted Slagle. “Those issues are now behind us and the order flows we’re seeing through the first half of August are strengthening.”

First Quarter Financial Results

Revenue in the first quarter of fiscal 2008 was a record $386.5 million, a 2.5 percent increase over fiscal 2007 first quarter revenue. Specialty segment revenue grew $18.7 million, or 8.9 percent, in the first quarter of fiscal 2008 from $209.4 million to $228.1 million. The Specialty segment had state adoption revenue of approximately $15 million in the quarter, which was offset to some extent by a $5 million decline in mass-merchant retail sales. Essentials revenue, which was impacted by the later start dates in many school districts, was $166.1 million as compared to the $174.9 million last year. Organic revenue growth for the combined segments was 2.5 percent.

Gross margin improved by 40-basis points from 44.5 percent to 44.9 percent. The increased gross margin was related to a shift in revenue mix toward the Specialty segment, which historically has higher gross margins than the Essentials segment. Revenue from the Specialty segment increased to 56.9 percent of total revenue in the first quarter of fiscal 2008 as compared to 53.6 percent of revenue in the first quarter of fiscal 2007.

Selling, general and administrative (SG&A) expenses decreased from 26.2 percent of revenue in the first quarter of fiscal 2007 to 25.9 percent of revenue in the first quarter of fiscal 2008. SG&A expenses increased $1.3 million from $98.8 million to $100.1 million. The increase in SG&A is attributable to the incremental variable selling and distribution expenses associated with the revenue growth. These increases have been offset to some extent by continued supply-chain efficiencies and other cost reduction efforts. First quarter operating income as a percent of revenue increased to 18.9 percent in fiscal 2008 as compared to 18.3 percent in fiscal 2007. Diluted earnings per share from continuing operations increased 16.9 percent from $1.60 in fiscal 2007 to $1.87 in fiscal 2008. Earnings from continuing operations increased 7.5 percent from $37.7 million in the first quarter of fiscal 2007 to $40.6 million in fiscal 2008, which accounted for approximately $0.12 of the $0.27 growth in diluted earnings per share from continuing operations.

Diluted earnings per share, which includes the discontinued School Specialty Media (SSM) business, increased to $1.86 in fiscal 2008 from $1.57 in fiscal 2007’s first quarter, an 18.5 percent increase. Net income, which includes a net of tax loss of $0.3 million from SSM, was $40.3 million in the first quarter of fiscal 2008, as compared to the prior year’s $36.9 million, which includes a net of tax loss of $0.9 million from SSM.

On June 5, 2007, the Company announced its Board of Directors authorized the repurchase of up to $45 million of its issued and outstanding common stock. During the first quarter of fiscal 2008 the Company repurchased 445,485 shares under this authority for a net purchase price of $16.0 million. Since the beginning of fiscal 2007, the Company has repurchased 2,571,606 shares for a net purchase price of $92.5 million.

Outlook

School Specialty is confirming the fiscal 2008 revenue guidance of $1.06 billion to $1.09 billion, and diluted earnings per share from continuing operations of $2.00 to $2.20 per share. The Company continues to expect free cash flow in fiscal 2008 to be in the range of $65 million to $75 million.

Conference Call

Investors have the opportunity to listen to School Specialty’s fiscal 2008 first quarter conference call live over the Internet through Vcall atwww.vcall.com. The conference call begins today, August 14, at 10:00 a.m. Central Time. To listen, go to the Vcall website at least 15 minutes before the start of the call to register, download and

install any necessary audio software. A replay will be available shortly after the call is completed and for the week that follows. A transcript will be available within two days of the call. The conference call will also be accessible through the Investor Information section of the School Specialty corporate web site atwww.schoolspecialty.com.

About School Specialty, Inc.

School Specialty is a leading education company that provides innovative and proprietary products, programs and services to help educators engage and inspire students of all ages and abilities to learn. The company designs, develops, and provides preK-12 educators with the latest and very best curriculum, supplemental learning resources, and school supplies. Working in collaboration with educators, School Specialty reaches beyond the scope of textbooks to help teachers, guidance counselors and school administrators ensure that every student reaches his or her full potential.

For more information about School Specialty, visit www.schoolspecialty.com.

Cautionary Statement Concerning Forward-Looking Information

Any statements made in this press release about future results of operations, expectations, plans or prospects constitute forward-looking statements. Forward-looking statements also include those preceded or followed by the words “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “should,” “plans,” “targets” and/or similar expressions. These forward-looking statements are based on School Specialty’s current estimates and assumptions and, as such, involve uncertainty and risk. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from those contemplated by the forward-looking statements because of a number of factors, including the factors described in Item 1A of School Specialty’s Annual Report on Form 10-K for the fiscal year ended April 28, 2007, which factors are incorporated herein by reference. Except to the extent required under the federal securities laws, School Specialty does not intend to update or revise the forward-looking statements.

-Financial Tables Follow-

SCHOOL SPECIALTY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts)

Unaudited

	Three Months Ended
	July 28, 2007			July 29, 2006
Revenues	$	386,513		$	377,071
Cost of revenues		213,145			209,160
Gross profit		173,368			167,911
Selling, general and administrative expenses		100,145			98,839
Operating income		73,223			69,072
Other (income) expense:
Interest expense		5,332			6,142
Interest income		(8	)		(35	)
Other		1,209			1,052
Income before provision for income taxes		66,690			61,913
Provision for income taxes		26,110			24,168
Earnings from continuing operations		40,580			37,745
Earnings (loss) from operations of discontinued
School Specialty Media business unit, net of income taxes		(259	)		(878	)
Net income	$	40,321		$	36,867
Weighted average shares outstanding:
Basic		21,134			22,883
Diluted		21,732			23,523
Basic earnings per share of common stock:
Earnings from continuing operations	$	1.92		$	1.65
Earnings (loss) from discontinued operations		(0.01	)		(0.04	)
Total	$	1.91		$	1.61
Diluted earnings per share of common stock:
Earnings from continuing operations	$	1.87		$	1.60
Earnings (loss) from discontinued operations		(0.01	)		(0.03	)
Total	$	1.86		$	1.57

SCHOOL SPECIALTY, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(In Thousands)

	July 28, 2007		April 28, 2007		July 29, 2006
ASSETS	(Unaudited)				(Unaudited)
Current assets:
Cash and cash equivalents	$	3,075	$	2,386	$	1,380
Accounts receivable		243,316		65,900		225,931
Inventories		198,868		177,319		171,941
Prepaid expenses and other current assets		30,689		33,246		35,932
Deferred taxes		10,331		10,201		6,693
Total current assets		486,279		289,052		441,877
Property, plant and equipment, net		76,447		77,345		79,550
Goodwill		538,257		534,488		584,319
Intangible assets, net		181,579		183,660		162,707
Other		25,517		26,334		27,790
Total assets	$	1,308,079	$	1,110,879	$	1,296,243
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities—long-term debt	$	133,598	$	133,590	$	133,560
Accounts payable		126,898		77,794		120,048
Other accrued liabilities		82,463		43,565		73,107
Total current liabilities		342,959		254,949		326,715
Long-term debt—less current maturities		366,987		293,139		331,784
Deferred taxes and other		54,213		50,246		50,674
Total liabilities		764,159		598,334		709,173
Total shareholders' equity		543,920		512,545		587,070
Total liabilities and shareholders' equity	$	1,308,079	$	1,110,879	$	1,296,243

SCHOOL SPECIALTY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

Unaudited

	Three Months Ended
	July 28, 2007			July 29, 2006
Cash flows from operating activities:
Net income	$	40,321		$	36,867
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible asset amortization expense		6,305			6,318
Amortization of development costs		3,221			1,866
Amortization of debt fees and other		508			247
Share-based compensation expense		1,503			1,214
Deferred taxes		3,087			2,161
Gain on disposal of property, equipment and other		(4	)		(21	)
Changes in current assets and liabilities (net of assets acquired and liabilities assumed in business combinations):
Accounts receivable		(177,390	)		(165,476	)
Inventories		(21,412	)		(12,836	)
Deferred catalog costs		2,915			5,635
Prepaid expenses and other current assets		(298	)		7,665
Accounts payable		49,306			45,337
Accrued liabilities		39,626			37,494
Net cash used in operating activities		(52,312	)		(33,529	)
Cash flows from investing activities:
Additions to property, plant and equipment		(3,445	)		(6,679	)
Investment in intangible and other assets		—			(102	)
Investment in product development costs		(2,923	)		(2,369	)
Proceeds from disposal of property, plant and equipment		15			604
Net cash used in investing activities		(6,353	)		(8,546	)
Cash flows from financing activities:
Proceeds from bank borrowings		199,000			317,600
Repayment of debt and capital leases		(125,144	)		(269,483	)
Purchase of treasury stock		(15,989	)		(7,575	)
Proceeds from exercise of stock options		1,310			510
Excess income tax benefit from exercise of stock options		177			—
Net cash provided by financing activities		59,354			41,052
Net increase (decrease) in cash and cash equivalents		689			(1,023	)
Cash and cash equivalents, beginning of period		2,386			2,403
Cash and cash equivalents, end of period	$	3,075		$	1,380
Free cash flow reconciliation:
Net cash used in operating activities	$	(52,312	)	$	(33,529	)
Additions to property and equipment		(3,445	)		(6,679	)
Investment in development costs		(2,923	)		(2,369	)
Proceeds from disposal of property and equipment		15			604
Free cash flow	$	(58,665	)	$	(41,973	)

School Specialty, Inc.

Segment Analysis—Revenues and Gross Profit/Margin Analysis

1st Quarter, Fiscal 2008

(In thousands)

Unaudited

Segment Revenues and Gross Profit/Margin Analysis-QTD

												% of Revenues
	1Q08-QTD			1Q07-QTD			Change $			Change %		1Q08-QTD		1Q07-QTD
Revenues
Specialty	$	228,139		$	209,468		$	18,671		8.9	%	58.9	%	55.6	%
Essentials		166,131			174,851			(8,720	)	-5.0	%	43.1	%	46.4	%
Corporate		168			175			(7	)	-4.0	%	0.0	%	0.0	%
Intercompany Eliminations		(7,925	)		(7,423	)		(502	)	6.8	%	-2.0	%	-2.0	%
Total Revenues	$	386,513		$	377,071		$	9,442		2.5	%	100.0	%	100.0	%
												% of Revenues
	1Q08-QTD			1Q07-QTD			Change $			Change %		1Q08-QTD		1Q07-QTD
Gross Profit
Specialty	$	118,661		$	109,582		$	9,079		8.3	%	68.3	%	65.4	%
Essentials		55,948			58,928			(2,980	)	-5.1	%	32.3	%	35.1	%
Corporate		168			175			(7	)	-4.0	%	0.1	%	0.1	%
Intercompany Eliminations		(1,409	)		(774	)		(635	)	82.0	%	-0.7	%	-0.6	%
Total Gross Profit	$	173,368		$	167,911		$	5,457		3.3	%	100.0	%	100.0	%

Segment Gross Margin Summary-QTD

Gross Margin	1Q08-QTD		1Q07-QTD
Specialty	52.0	%	52.3	%
Essentials	33.7	%	33.7	%
Corporate	100.0	%	100.0	%
Intercompany Eliminations	17.8	%	10.4	%
Total Gross Margin	44.9	%	44.5	%