Abstract: Disclosed are an apparatus and method for cutting paper sheets into smaller sheet sections and collating the sheet sections. The apparatus includes a table having a longitudinal section, followed by a transverse section. Chains just below the table move a sheet stack longitudinally past a first blade which cuts the stack longitudinally, after which one of the stack portions is elevated above the other and placed on top of the other to combine the portions into a second stack. A second pair of chains moves the second stack in the transverse direction past a second blade which cuts the second stack transversely. One of the stack portions formed by the second cut is elevated above, then placed on top of, the other portion to form a further reduced sized third stack, which then is moved transversely to a third cutting station at which it is cut in the transverse direction. Again, one of the portions created by the third cut is elevated above and placed on the other portion to form a final stack of sheet sections.