The World-Herald is the largest employee-owned daily newspaper in the United States, with the Companys roots dating

back to 1889. The Company has been employee-owned since 1979 when one of the owners provided for the paper to be sold to its employees in his will. The World-Herald is the only statewide newspaper in Nebraska, serving more than 500 cities and towns with home and business delivery. The Company has two material unrestricted subsidiaries, which include World Marketing, Inc. and World Investments, Inc. World Marketing, Inc. World Marketing, Inc. operates as a direct marketing firm and World Investments, Inc. has several minority investments in companies, including Election Systems & Software, Inc., the worlds largest provider of electronic election ballots. The unrestricted subsidiaries are excluded from the Companys reported financial results and covenant calculations; however, there is a restriction on subsidiary indebtedness. Revenue for the year increased slightly to $177.5 million. Advertising, the largest component of revenue at 53% of total revenue, declined 3% on the year to $94 million. Circulation revenues totaling $30.2 million, or 17% of total revenue, remained constant for the year. Operating income decreased slightly to $15.1 million due to increased impairment costs and losses on asset disposals. The World-Herald reported total financial debt of $63.5 million consisting of $30.0 million in private placement notes and $17.5 million outstanding on its $60.0 million revolving credit facility. The Company has indicated that it is currently speaking to several banks with regards to a new credit facility. In 2010, operating cash flow of $21.4 million and $18 million of asset proceeds and subsidiary dividends supported debt repayments of $14.5 million and the repurchase of company stock. The Company has taken several measures to combat lower advertising revenue including limiting State Circulation to profitable addresses, the development of a new internet advertising format and an updated website. The World-Herald continues to focus on limiting cash drain as evidenced by lower capital expenditures, a limitation on share repurchases and a continued focus on lowering operating costs. Financial Covenants: The Company is in compliance with its financial covenants as of 12/31/2010. The Note Agreement contains various covenants including a maximum leverage ratio of 4.0 to 1.0 (Actual 1.75:1); a restricted payments test of $293 million (Actual $67 million); a limitation on subsidiary indebtedness of $18 million (Actual $0); and a restricted investments test of $18.4 million (Actual $400k). Rating Rationale Our rating reflects: o The Companys position as Nebraskas major newspaper. o The stabilization in advertising and circulation revenue declines. o The Company recently took steps to slow the decline in advertising revenue through a revamped website and a new online advertising format; however, it is too early to quantify the potential impact of these changes. o Management has taken several steps to reduce operating expenses and cash outflows, but there may me more room to move with regards to the elimination of the dividend payment.