Sales at McGraw-Hill Education increased 6.4%, to $278.2 million, for the 2003 first quarter ended March 31, while the company's operating loss was reduced to $68.8 million from $70.1 million. The increase was led by an 8.6% gain in the school education group, to $125.1 million, while sales in the higher education, professional and international group rose 4.7%, to $153.1 million.

Sales in the school group were driven by higher sales in reading and testing, which is benefiting from the release of funds from the No Child Left Behind Act. Terry McGraw, chairman of M-HE parent company McGraw-Hill Cos., said it is "clear" that funds from the act are finding their way into the market, and he expects those funds to have more of an impact in the second and third quarter. But McGraw said fewer adoption opportunities this year will counterbalance that infusion of funds, and he still expects that sales in the elhi industry will fall about 5% in 2004. McGraw said he expects M-HE to outperform the market, however.

In its higher education, professional and international group, the college division had a strong start led by demand for business and economic textbooks. Sales were also up in the science, engineering and math categories. In response to an analyst's question, McGraw said that while electronic textbooks present an "interesting" opportunity, M-HE hasn't moved more aggressively in that market because it hasn't seen a very good response to the e-textbooks that the company already offers. Soft sales in computer books continue to hurt results in the professional segment.

McGraw said the company is continuing to forecast growth of 2% to 3% in the higher education market in the year, with M-HE projected to beat that gain.