Riding the wave of strong state funding, a number of successful elhi adoptions and recent acquisitions, the McGraw-Hill Companies reported that revenue in its education group rose 26.4%, to $566.2 million in the second quarter ended June 30, 2001, and operating profit increased 33% to $68 million. Company chairman Terry McGraw said the outlook for the second half of 2001 is "very promising" and a "solid year is shaping up in education."

McGraw said MHC is "encouraged" by the progress made on the federal education bill, and the publisher expects to see an infusion of federal funds directed at such areas as testing, reading and early reading, math, science, professional development and technology training. McGraw also noted that education remains a budget priority for most states in the 2001—2002 fiscal year.

Various school group divisions including Macmillan/ McGraw-Hill, SRA/McGraw-Hill and the Wright Group, as well as recently acquired titles in the NTC/Tribune unit, did well in the large adoption states of Texas, California and Florida. The school group's reading, language arts, literature and testing programs were doing well across the board, while its math program was meeting expectations in every area but California.

In other segments, MHC said the higher education group had a solid quarter with increases in both frontlist and backlist titles. The professional book unit had higher revenues in a "difficult environment." In the international sector, the company's Canadian and Asia Pacific units had strong revenue gains, but weakness in Latin America and the Ibero group resulted in a decline in operating profits.

McGraw said that given MHC's strong financial position, the company was looking to make niche acquisitions, along the lines of the May purchase of Frank Schaffer Publications. Asked about the future of Landoll, McGraw said that the company was committed to strengthening its children's publishing program, but added, "some areas are not as attractive" as others. Late last year MHC education president Bob Evanson said that while MHC was interested in keeping Landoll's education business, it was still deciding what to do with the unit's consumer business. In its second quarter filing with the Securities and Exchange Commission, MHC observed that the children's division benefited from the Schaffer purchase, but was "negatively impacted" by a weak environment "where deep discounting is a standard."

For the first six months of the year, education group revenues were up 27.7%, to $873.9 million, but operating profit fell 20.2%, to $10.2 million.