FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1995.
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _____________
Commission File Number: 0-19889
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
Exact name of registrant as specified in charter
Colorado 84-1145140
______________________________________________________________________
State of organization I.R.S. employer I.D.#
Bell Cablemedia House, Upton Road, Watford, Hertfordshire, WD1 7EL, England
___________________________________________________________________________
Address of principal executive office
011 44 1923 444000
______________________________
Registrant's telephone number
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _____
___
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS: 1995 1994
_______ _________ ____________
CASH AND CASH EQUIVALENTS $1,124,986 $139,307
RECEIVABLES
Other receivables 2,853,478 2,807,303
INVESTMENT IN CABLE TELEVISION AND
TELECOMMUNICATIONS PROPERTIES, net of
accumulated depreciation and amortization of 73,303,628 70,225,246
$7,532,149 and $5,394,293 at June 30, 1995
and December 31, 1994 respectively
PREPAID EXPENSES AND OTHER ASSETS 1,003,323 301,754
----------- -----------
Total assets $78,285,415 $73,473,610
LIABILITIES:
Accounts payable to affiliates and
related parties $ 1,098,158 $ 6,028,108
Trade accounts payable 4,414,561 3,160,657
Accrued liabilities 3,571,835 8,226,047
Note payable 21,560,946 4,446,268
----------- -----------
Total liabilities 30,645,500 21,861,080
----------- -----------
MINORITY INTERESTS 17,084,455 18,553,653
PARTNERS' CAPITAL (DEFICIT):
General Partner
Contributed capital 1,000 1,000
Accumulated deficit (179,919) (145,921)
----------- -----------
(178,919) (144,921)
----------- -----------
Limited Partners
Net contributed capital (56,935 units
outstanding at June 30, 1995 and
December 31,1994, respectively) 48,817,997 48,817,997
Accumulated deficit (17,530,709) (14,164,882)
----------- -----------
31,287,288 34,653,115
----------- -----------
Currency translation adjustment (552,909) (1,449,317)
----------- -----------
Total partners' capital 30,555,460 33,058,877
----------- -----------
Total liabilities and partners' capital $78,285,415 $73,473,610
The accompanying notes to unaudited financial statements are an
integral part of these unaudited balance sheets.
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
----------------------------- ----------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $3,966,334 $1,977,871 $7,468,750 $3,588,950
COSTS AND EXPENSES:
Operating, general and administrative 3,966,883 3,205,602 7,793,191 5,386,798
Management fees and allocated
overhead from the General Partner 1,093,305 356,288 1,411,125 743,621
Depreciation and amortization 1,058,255 808,182 2,072,573 1,518,551
----------- ---------- ---------- ----------
OPERATING LOSS (2,152,109) (2,392,201) (3,808,139) (4,060,020)
OTHER INCOME (EXPENSE):
Interest expense (574,916) (224,422) (1,060,884) (331,768)
Interest income -- 73,046 123,166
----------- ---------- ---------- ----------
LOSS BEFORE MINORITY (2,727,025) (2,543,577) (4,869,023) (4,268,622)
INTERESTS
Minority interests 790,246 624,677 1,469,198 1,035,563
----------- ---------- ---------- ----------
NET LOSS $(1,936,779) $(1,918,900) $(3,399,825) $(3,233,059)
ALLOCATION OF NET LOSS:
General Partner $(19,368) $(19,189) $(33,998) $(32,331)
Limited Partners $(1,917,411) $(1,899,711) $(3,365,827) $(3,200,728)
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(33.68) $(33.38) $(59.12) $(60.91)
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP 56,935 56,912 56,935 52,550
UNITS OUTSTANDING
</TABLE>
The accompanying notes to unaudited financial statements are an
integral part of these unaudited statements.
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended
June 30,
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,399,825) $(3,233,059)
Adjustments to reconcile net loss
to net cash used in operating activities:
Minority interests (1,469,198) (1,035,563)
Depreciation and amortization 2,072,573 1,518,551
Increase in other receivables (46,175) (370,130)
Increase in prepaid expenses and other assets (701,569) (84,111)
Decrease in accounts payable to related parties (952,354) --
(Decrease) increase in trade accounts payable and
accrued liabilities (1,734,319) 1,856,066
----------- -----------
Net cash used in operating activities (6,230,867) (1,348,246)
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction payments for cable television/telephony system (6,882,227) (18,589,010)
----------- -----------
Net cash used in investing activities (6,882,227) (18,589,010)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital, net of syndication costs and sales -- 12,734,812
commissions
Increase (decrease) in borrowings 17,114,678 (48,909)
Decrease in net subscriptions receivable -- 531,300
Decrease in accounts payable to affiliates -- (2,368,948)
Repayment of shareholder loans (3,977,596) --
Proceeds from sale of common stock by subsidiary -- 5,538,326
----------- -----------
Net cash provided by financing activities 13,137,082 16,386,581
Effect of currency exchange rate changes 961,691 1,649,084
----------- -----------
Increase (decrease) in cash and cash equivalents 985,679 (1,901,591)
Cash and cash equivalents, beginning of period 139,307 9,940,929
----------- -----------
Cash and cash equivalents, end of period $1,124,986 $8,039,338
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $795,031 $40,338
</TABLE>
The accompanying notes to unaudited financial statements are an
integral part of these unaudited statements.
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying financial information should be read in conjunction with the
financial statements of the South Hertfordshire United Kingdom Fund, Ltd. (the
"Partnership"), including the notes thereto, for the year ended December 31,
1994. The financial information included herein is unaudited. However, in
the opinion of management, such information reflects all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
the financial position of the Partnership at June 30, 1995 and its results of
operations and cash flows for the six month periods ended June 30, 1995 and
1994. Results of operations for these periods are not necessarily indicative
of results to be expected for the full year. As a result of the Partnership's
ownership of 66.7 percent of the shares of Bell Cablemedia (South
Hertfordshire) Limited ("Bell Cablemedia South Herts"), for accounting
purposes it has been consolidated with the Partnership's operations.
(2) INVESTMENT IN SUBSIDIARY
Bell Cablemedia South Herts is a United Kingdom corporation that owns and
operates a cable television/telephony system in the South Hertfordshire
franchise area, located adjacent to the northwest perimeter of Greater London,
England (the "South Herts System"). At June 30, 1995, the network under
construction consisted of approximately 550 miles of cable plant, which passed
approximately 81,500 homes. At June 30, 1995 the South Herts System's cable
television subscribers totalled approximately 16,500 and the South Herts
System's residential telephony customers totalled approximately 18,600. In
addition, the South Herts System provided telephony services to 610 businesses
in its franchise area. Changes to Bell Cablemedia South Herts' systems for
collecting period end statistics have resulted in a one-off downward
adjustment of 1,003 residential telephony customers, which is incorporated in
the number of telephony customers above.
On February 20, 1992, upon receipt of approval from United Kingdom regulatory
authorities, the Partnership acquired the beneficial ownership of 100 percent
of the shares of Bell Cablemedia South Herts (formerly Jones Cable Group of
South Hertfordshire Limited). The acquisition by the Partnership of all of
the shares of Bell Cablemedia South Herts resulted in the Partnership
acquiring beneficial ownership of the South Herts System. Through June 30,
1995, the total amount invested by the Partnership to fund the South Herts
System's construction and development was approximately $48,800,000.
In order to provide additional funding for the construction of the South Herts
System, two additional participants invested in Bell Cablemedia South Herts in
1993 and 1994. Jones Intercable of South Hertfordshire, Inc. invested Pound
Sterling3,400,000 in Bell Cablemedia South Herts in exchange for 34,000 Class
A shares in November 1993. Also in November 1993, affiliates of Sandler
Capital Management (the "Sandler Group") committed to invest Pound
Sterling6,800,000 in Bell Cablemedia South Herts, of which Pound
Sterling2,266,600 was funded in November 1993 for 22,666 Class B shares. In
June 1994, the Sandler Group invested Pound Sterling3,273,232 for 32,732
Class B shares and Jones Intercable of South Hertfordshire, Inc. invested
Pound Sterling503,283 for 5,033 Class B shares. In July 1994, the Sandler
Group invested Pound Sterling1,800,000 for 18,000 Class B shares and Jones
Intercable of South Hertfordshire Inc. invested Pound Sterling466,800 for
4,668 Class B shares.
On June 10, 1994, Jones Global Group, Inc. ("Global Group"), Jones Intercable,
Inc. and certain of their subsidiaries (collectively "Jones") and the Sandler
Group entered into agreements to transfer all of their interests in their
United Kingdom cable/telephony operations and franchises, including Jones
Intercable of South Hertfordshire, Inc.'s interest in Bell Cablemedia South
Herts, Jones Global Funds, Inc.'s general partner interest in the Partnership
and the Sandler Group's interest in Bell Cablemedia South Herts to Bell
Cablemedia plc ("BCM") in exchange for ordinary shares (in the form of
American Depositary Shares ("ADSs")) to be issued by BCM in connection with a
planned public offering of ADSs by BCM. At that date, BCM was indirectly
owned 80 percent by Bell Canada International Inc. and 20 percent by Cable &
Wireless plc.
On July 22, 1994, in connection with the closing of the public offering by
BCM, Jones and the Sandler Group completed the exchange of their interests in
United Kingdom cable/telephony operations and franchises for ADSs issued by
BCM. At closing, BCM acquired Jones Intercable of South Hertfordshire, Inc.'s
interest in Bell Cablemedia South Herts, the Sandler Group's interest in Bell
Cablemedia South Herts and Jones Global Funds, Inc.'s general partner interest
in the Partnership. In October 1994, the Partnership invested Pound
Sterling5,108,900 in Bell Cablemedia South Herts for 51,089 Class A shares and
BCM invested Pound Sterling2,554,600 in Bell Cablemedia South Herts for
25,546 Class A shares. In November 1994, the Partnership invested Pound
Sterling1,410,000 in Bell Cablemedia South Herts for 14,100 Class A shares and
BCM invested Pound Sterling705,000 in Bell Cablemedia South Herts for 7,050
Class A shares. As a result of these transactions, Bell Cablemedia South
Herts is now owned 66.7 percent by the Partnership and 33.3 percent by BCM,
and the general partner of the Partnership is now Fawnspring Limited (the
"General Partner"), a wholly owned subsidiary of BCM. The General Partner
provides consulting services to the Partnership. The General Partner may
delegate some or all of the consulting services to BCM or to other affiliates.
BCM, through its majority-owned subsidiaries and the companies in which it
holds minority interests, including Videotron Holdings Plc, in which BCM owns
a 26.2 percent equity interest, holds exclusive cable television licenses and
related non-exclusive telecommunications licenses covering over one million
equity homes in the Greater London and adjacent areas. In addition to its
London franchises, BCM holds cable television and telecommunications licenses
covering franchise areas in other regions of the United Kingdom. BCM has over
two million equity homes in its franchise areas and, in terms of equity homes,
BCM is one of the largest holders of cable television and telecommunications
licenses in the United Kingdom.
(3) TRANSACTIONS WITH AFFILIATED ENTITIES
The General Partner of the Partnership or its affiliates are entitled to be
paid a consulting fee by Bell Cablemedia South Herts. During the construction
phases of the South Herts System, this consulting fee is 2 percent of
construction costs. After completion of construction of each portion of the
system, the consulting fee for the completed portion is 5 percent of the gross
revenues, excluding revenues from the disposal of cable television/telephony
systems. The consulting fee is calculated and payable monthly. Consulting
fees paid or payable by Bell Cablemedia South Herts for the three months ended
June 30, 1995 and 1994 were $241,738 and $115,840 respectively. Of these
amounts, $0 and $16,947 were capitalized in the investment in cable television
and telecommunications properties on the Unaudited Consolidated Balance Sheets
and $241,744 and $98,893 were expensed on the Unaudited Consolidated
Statements of Operations for the three months ended June 30, 1995 and 1994
respectively.
Consulting fees paid or payable by Bell Cablemedia South Herts for the six
months ended June 30, 1995 and 1994 were $465,432 and $213,342 respectively.
Of these amounts $0 and $33,894 were capitalized in the investment in cable
television and telecommunications properties on the Unaudited Consolidated
Balance Sheets and $465,432 and $179,448 were expensed on the Unaudited
Consolidated Statements of Operations for the six months ended June 30, 1995
and 1994 respectively.
The General Partner and its affiliates are entitled to reimbursement from Bell
Cablemedia South Herts for direct and indirect expenses allocable to the
operation of the South Herts system and from the Partnership for direct and
indirect expenses allocable to the operation of the Partnership, which
include, but are not limited to, rent, supplies, telephone, travel, copying
charges and salaries of any full or part-time employees. The General Partner
believes that the methodology used in allocating these expenses is reasonable.
During the three months ended June 30, 1995 and 1994, reimbursements made by
Bell Cablemedia South Herts and the Partnership to the General Partner or its
affiliates for any allocable direct and indirect expenses totalled $585,300
and $257,395 respectively. During the six months ended June 30, 1995 and
1994, reimbursements made by Bell Cablemedia South Herts and the Partnership
to the General Partner or its affiliates for any allocable direct and indirect
expenses totalled $679,426 and $564,173, respectively.
In connection with Bell Cablemedia South Herts' Pound Sterling25,000,000
revolving and term loan credit facility agreement entered into in April 1995,
and described in section (5) below, Bell Cablemedia Management Limited, an
affiliate of the General Partner, received a 1% financing fee. The fee was
allocated between the investors in Bell Cablemedia South Herts in proportion
to their shareholding. The Partnership's share of this fee amounted to
$266,267.
The General Partner and its affiliates may make advances to, and defer
collection of fees and allocated expenses owed by, the Partnership, although
they are not required to do so. The Partnership will be charged interest on
such advances and deferred amounts at a rate equal to the General Partner's or
certain affiliates' weighted average cost of all debt financing from
unaffiliated entities. For both the three and six months ended June 30, 1995
and 1994, no such interest had been charged to the Partnership by the General
Partner or its affiliates.
(4) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Currency Exchange Rates
The costs incurred by Bell Cablemedia South Herts are converted from United
Kingdom pounds sterling to United States dollars pursuant to Statement of
Financial Accounting Standard No. 52 ("SFAS 52"). Since pounds sterling
represent Bell Cablemedia South Herts functional currency, translation
adjustments related to recording assets and liabilities in United States
dollars at current exchange rates are charged or credited directly to
cumulative translation adjustment in shareholders' equity. At the discretion
of the General Partner, funds of the Partnership being held in United States
dollars were converted from United States dollars to United Kingdom pounds
sterling. Likewise, net proceeds from the sale or refinancing of the
Partnership's cable television/telephony properties will be converted from
United Kingdom pounds sterling to United States dollars in order to make any
distributions to the partners.
Through September 1994, the Partnership purchased United Kingdom pounds
sterling through forward foreign exchange contracts. The blended average
exchange rate under these contracts was United States $1.68 per United Kingdom
pound sterling. At December 31, 1994, the Partnership had incurred a
cumulative loss of $334,980 on these contracts, which has been capitalized in
the investment of cable television and telecommunications properties on the
Consolidated Balance Sheets. There were no forward foreign exchange contracts
available to the Partnership at June 30, 1995.
Property, Plant and Equipment
Prior to receiving the first revenues from subscribers of a cable
television/telephony system constructed by the Partnership, all construction
costs, operating expenses and interest related to the system are capitalized.
The General Partner has estimated a prematurity period of three years for the
South Herts System based upon its urban location, housing density and
requirement for mostly underground cable. The portions capitalized are
decreased as progress is made toward obtaining the subscriber level expected
at the end of the prematurity period, after which no further expenses are
capitalized. In addition, costs (including labor, overhead and other costs of
completion) associated with installation in homes not previously served by
cable television/telephony are capitalized and included as a component of the
investment in cable television and telecommunications properties. From
inception to June 30, 1995, the South Herts System had received $19,491,381
revenue from operations and had capitalized approximately $2,784,526 of
expenses.
Depreciation is provided on property, plant and equipment at rates which are
intended to write off the cost of the assets over their estimated useful
lives. Effect is given to commercial and technical obsolescence.
Depreciation is provided on a straight line basis over 5-40 years for the
cable network and other electronic equipment, 35 years for freehold property
and 4-8 years for office and other equipment. Depreciation of the capitalized
construction costs begins from the time of receiving first revenues from
subscribers. During the prematurity period a portion of the depreciation is
recognized, based on the projected construction costs at the end of the
prematurity period. The portions depreciated are increased as progress is
made toward the prematurity period, after which full depreciation continues.
(5) FINANCINGS
In July 1992, Bell Cablemedia South Herts entered into an agreement with a
bank to refinance its primary office/headend building for Pound
Sterling800,000. This loan was to be repaid over 10 years with quarterly
principal and interest payments due July 1993 through July 2002. Interest
was calculated at the London InterBank Offered Rate ("LIBOR") plus 2
percent. For the three months ended June 30, 1995 and 1994, Bell
Cablemedia South Herts had recorded interest expense of $0 and $20,106
respectively on this loan. In March 1995, the bank financing for the
office/headend building was repaid. For the six months ended June 30, 1995
and 1994, Bell Cablemedia South Herts had recorded interest expense of
$19,439 and $40,338 respectively on this loan.
On April 18, 1995 Bell Cablemedia South Herts entered into an agreement with
two major banks to provide a Pound Sterling25,000,000 revolving and term loan
credit facility agreement maturing on December 31, 2003 (the "South Herts
Credit Agreement").
The credit facility is structured as a revolving facility through December 31,
1997, at which time the facility will be converted into a term loan. The term
loan portion will require repayment of outstanding principal amounts beginning
in 1999, with the final 50% of such amounts being repaid in 2002 and 2003.
The facility is divided into two tranches, denoted Facility A and Facility B,
and the aggregate amount drawn down under both tranches may not exceed Pound
Sterling25,000,000. Amounts drawn down under Facility A bear interest at
sterling LIBOR plus a margin of 2.5%. The availability of Facility B of
Pound Sterling25,000,000 is subject to certain conditions which have not
currently been satisfied and amounts drawn down under Facility B will bear
interest at sterling LIBOR plus a margin ranging from 0.75% to 2.0% depending
on the bank debt ratio (the ratio of bank debt to annualised operating cash
flow) of Bell Cablemedia South Herts.
The South Herts Credit Agreement contains various covenants including
financial covenants such as a cumulative revenue test, bank debt ratio,
interest cover ratio, a homes marketed test, a fixed charges ratio and a
pro-forma debt service ratio and other covenants such as restrictions on
disposals and on the creation of indebtedness and encumbrances. The South
Herts Credit Agreement also includes a restriction on the payment of
dividends which provides that dividends or distributions in respect of its
issued share capital and payments in respect of certain intercompany loans
may not be made prior to December 31, 1997. Such payments will be
permitted thereafter only if the bank debt ratio for the previous two
accounting quarters is less than 5.5:1 and no event of default or potential
event of default has occurred and is continuing at such time and the
payment of such dividend or distribution will not give rise to an event of
default or potential default.
The South Herts Credit Agreement contains certain events of default, including
non-payment of amounts due under the South Herts Credit Agreement, breaches of
representations and covenants (including financial ratios) contained in the
South Herts Credit Agreement, cross-default to certain other indebtedness of
Bell Cablemedia South Herts, certain bankruptcy and insolvency events and
certain changes of ownership.
The obligations of Bell Cablemedia South Herts under the South Herts Credit
Agreement are secured by first fixed and floating charges over all of the
assets of Bell Cablemedia South Herts. In addition, there is a pledge of all
of the share capital of Bell Cablemedia South Herts given by Bell Cablemedia
plc and the Partnership as additional security for the facility.
Drawdowns of Pound Sterling11,600,000 have occurred under the South Herts
Credit Agreement since April 1995, partly to repay the temporary loans made to
Bell Cablemedia South Herts by BCM since November 1994. The General Partner
believes that the South Herts Credit Agreement will be sufficient to fund the
completion of construction and operation of the South Herts system.
(6) COMMITMENTS
In October 1992, Bell Cablemedia South Herts entered into a short-term
interconnection agreement with British Telecommunications plc so that it
can provide both long-distance national and international telephony
services. This agreement has a major review on April 1, 1997. Also, in
May 1994, Bell Cablemedia South Herts entered into an interconnection
agreement with Mercury Communications Limited to provide both long-distance
national and international telephony services. This agreement expires
April 16, 1996.
As of June 30, 1995 approximately 87 percent of the homes in the South Herts
System had been passed with cable. Because Bell Cablemedia South Herts did
not meet the construction timetable set forth in the original license issued
for the South Hertfordshire franchise area, Bell Cablemedia South Herts
requested an amendment of the construction timetable from OFTEL, the United
Kingdom regulatory authority that is responsible for enforcing the license.
On February 28, 1994, OFTEL modified the South Herts System's license. The
license, as modified, requires that the South Herts System pass 60,000
premises with cable by December 31, 1994 and that it be completed (by passing
85,000 premises) by December 31, 1995. At June 30, 1995, the network under
construction consisted of approximately 550 miles of cable plant, passing
approximately 81,500 homes, and was essentially complete, within the required
time frame of the renegotiated OFTEL license agreement.
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND
South Hertfordshire United Kingdom Fund, Ltd. (the "Partnership") was formed
on December 23, 1991 to acquire, construct, develop, own and operate cable
television/telephony systems in the United Kingdom. As of June 30, 1995, the
Partnership had received limited partner subscriptions of $56,935,000, or
$48,817,997 net of sales commissions and other organizational and offering
costs. Sales of limited partnership interests ended in April 1994.
In connection with and subsequent to the Partnership's acquisition of Bell
Cablemedia (South Hertfordshire) Limited ("Bell Cablemedia South Herts") the
Partnership has invested its net offering proceeds in Bell Cablemedia South
Herts for construction and development costs. Through June 30, 1995 the total
amount invested by the Partnership was approximately $48,800,000.
Bell Cablemedia South Herts provides a local telephony service using telephony
switching equipment that it owns, and it has entered into interconnection
agreements with British Telecommunications plc and Mercury Communications
Limited so that it can provide local, long-distance, national and
international telephony services. The interconnection agreement with British
Telecommunications plc has a major review on April 1, 1997. The
interconnection agreement with Mercury Communications Limited expires April
16, 1996. Testing of the telephony service started in November 1992, and the
service was first offered to the South Herts System's subscribers in February
1993.
In order to provide additional funding for the construction of the South Herts
System, two additional participants invested in Bell Cablemedia South Herts in
1993 and 1994. Jones Intercable of South Hertfordshire, Inc. invested Pound
Sterling3,400,000 in Bell Cablemedia South Herts in exchange for 34,000 Class
A shares in November 1993. Also in November 1993, affiliates of Sandler
Capital Management (the "Sandler Group") committed to invest Pound
Sterling6,800,000 in Bell Cablemedia South Herts of which Pound
Sterling2,266,600 was funded in November 1993 for 22,666 Class B shares. In
June 1994 the Sandler Group invested Pound Sterling3,273,232 for 32,732 Class
B shares and Jones Intercable of South Hertfordshire, Inc. invested Pound
Sterling503,283 for 5,033 Class B shares. In July 1994, the Sandler Group
invested Pound Sterling1,800,000 for 18,000 Class B shares and Jones
Intercable of South Hertfordshire, Inc. invested Pound Sterling466,800 for
4,668 Class B shares.
On June 10, 1994, Jones Global Group, Inc. ("Global Group"), Jones Intercable,
Inc. and certain of their subsidiaries (collectively, "Jones") and the Sandler
Group entered into agreements to transfer all of their interests in their
United Kingdom cable/telephony operations and franchises, including Jones
Intercable of South Hertfordshire, Inc.'s interest in Bell Cablemedia South
Herts, Jones Global Funds, Inc.'s general partner interest in the Partnership
and the Sandler Group's interest in Bell Cablemedia South Herts to Bell
Cablemedia plc ("BCM") in exchange for ordinary shares (in the form of
American Depositary Shares ("ADSs") to be issued by BCM in connection with a
planned public offering of ADSs by BCM. At that date, BCM was indirectly
owned 80 percent by Bell Canada International Inc. and 20 percent by Cable &
Wireless plc.
On July 22, 1994, in connection with the closing of the public offering by
BCM, Jones and the Sandler Group completed the exchange of their interests in
United Kingdom cable/telephony operations and franchises for ADSs issued by
BCM. At closing, BCM acquired Jones Intercable of South Hertfordshire, Inc.'s
interest in Bell Cablemedia South Herts, the Sandler Group's interest in Bell
Cablemedia South Herts and the general partner interest in the Partnership.
In October, 1994, the Partnership invested Pound Sterling5,108,900 in Bell
Cablemedia South Herts for 51,089 Class A shares and BCM invested Pound
Sterling2,554,600 in Bell Cablemedia South Herts for 25,546 Class A shares.
In November 1994, the Partnership invested Pound Sterling1,410,000 in Bell
Cablemedia South Herts for 14,100 Class A shares and BCM invested Pound
Sterling705,000 in Bell Cablemedia South Herts for 7,050 Class A Shares. As a
result of these transactions, Bell Cablemedia South Herts is now owned 66.7
percent by the Partnership and 33.3 percent by BCM, and the general partner of
the Partnership is now Fawnspring Limited (the "General Partner"), a wholly
owned subsidiary of BCM.
BCM, through its majority-owned subsidiaries and the companies in which it
holds minority interests, including Videotron Holdings Plc, in which BCM owns
a 26.2 percent equity interest, holds exclusive cable television licenses and
related non-exclusive telecommunications licenses covering over one million
equity homes in the Greater London and adjacent areas. In addition to its
London franchises, BCM holds cable television and telecommunications licenses
covering franchise areas in other regions of the United Kingdom. BCM has over
two million equity homes in its franchise areas and, in terms of equity homes,
BCM is one of the largest holders of cable television and telecommunications
licenses in the United Kingdom.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership. The Partnership's source of cash has been the net proceeds
of its offerings of limited partnership interests. Historically, the
Partnership's principal uses of cash have been capital contributions to Bell
Cablemedia South Herts in order to fund the Partnership's proportionate share
of the construction costs of the South Herts System. As discussed below, the
General Partner believes that no additional capital contributions will be
required to fund the completion of construction and operations of the South
Herts System. Accordingly, in the future, the Partnership's uses of cash will
be restricted to covering its administration costs (principally insurance
premiums, legal and accounting costs associated with the Partnership's annual
audit and periodic regulatory filings and general administration). As of June
30, 1995 the Partnership had a receivable from BCM of approximately $100,000
but current liabilities of approximately $170,000. Accordingly, until such
time as Bell Cablemedia South Herts begins to pay dividends on its ordinary
shares (which is not expected in the foreseeable future) the Partnership will
be required to fund its administrative expenses by additional issuances of
limited partnership interests or from borrowings.
Bell Cablemedia South Herts. During the first six months of 1995, Bell
Cablemedia South Herts had approximately $5,200,000 of capital expenditures.
All of these expenditures were for the construction of the South Herts System
and were principally funded by borrowings.
In July 1992, Bell Cablemedia South Herts entered into an agreement with a
bank to refinance its primary office/headend building for Pound
Sterling800,000. This loan was to be repaid over 10 years with quarterly
principal and interest payments due July 1993 through July 2002. Interest was
calculated at the London Interbank Offered Rate ("LIBOR") plus 2 percent. In
March 1995, this loan was repaid.
On April 18, 1995 Bell Cablemedia South Herts entered into an agreement with
two major banks to provide a Pound Sterling25,000,000 revolving and term loan
credit facility agreement maturing on December 31, 2003 (the "South Herts
Credit Agreement").
The credit facility is structured as a revolving facility through December 31,
1997, at which time the facility will be converted into a term loan. The term
loan portion will require repayment of outstanding principal amounts beginning
in 1999, with the final 50% of such amounts being repaid in 2002 and 2003.
The facility is divided into two tranches, denoted Facility A and Facility B,
and the aggregate amount drawn down under both tranches may not exceed Pound
Sterling25,000,000. Amounts drawn down under Facility A bear interest at
sterling LIBOR plus a margin of 2.5%. The availability of Facility B of
Pound Sterling25,000,000 is subject to certain conditions which have not
currently been satisfied and amounts drawn down under Facility B will bear
interest at sterling LIBOR plus a margin ranging from 0.75% to 2.0% depending
on the bank debt ratio (the ratio of bank debt to annualised operating cash
flow) of Bell Cablemedia South Herts.
The South Herts Credit Agreement contains various covenants including
financial covenants such as a cumulative revenue test, bank debt ratio,
interest cover ratio, a homes marketed test, a fixed charges ratio and a
pro-forma debt service ratio and other covenants such as restrictions on
disposals and on the creation of indebtedness and encumbrances. The South
Herts Credit Agreement also includes a restriction on the payment of
dividends which provides that dividends or distributions in respect of its
issued share capital and payments in respect of certain intercompany loans
may not be made prior to December 31, 1997. Such payments will be
permitted thereafter only if the bank debt ratio for the previous two
accounting quarters is less than 5.5:1 and no event of default or potential
event of default has occurred and is continuing at such time and the
payment of such dividend or distribution will not give rise to an event of
default or potential default.
The South Herts Credit Agreement contains certain events of default including
non-payment of amounts due under the South Herts Credit Agreement, breaches of
representations and covenants (including financial ratios) contained in the
South Herts Credit Agreement, cross-default to certain other indebtedness of
Bell Cablemedia South Herts, certain bankruptcy and insolvency events and
certain changes of ownership.
The obligations of Bell Cablemedia South Herts under the South Herts Credit
Agreement are secured by first fixed and floating charges over all of the
assets of Bell Cablemedia South Herts. In addition, there is a pledge of all
of the share capital of Bell Cablemedia South Herts given by BCM and the
Partnership as additional security for the facility.
Drawdowns of Pound Sterling11,600,000 have occurred under the South Herts
Credit Agreement since April 1995, partly to repay the temporary loans made to
Bell Cablemedia South Herts by BCM since November 1994. The General Partner
believes that the South Herts Credit Agreement will be sufficient to fund the
completion of construction and operation of the South Herts system.
RESULTS OF OPERATIONS
Revenues of the Partnership increased $1,988,463 for the three months ended
June 30, 1995, over the corresponding period in 1994 from $1,977,871 in 1994
to $3,966,334 in 1995. Revenues of the Partnership increased $3,879,800 for
the six months ended June 30, 1995, over the similar period in 1994,
increasing from $3,588,950 in 1994 to $7,468,750 in 1995. These increases
were the result of increases in the South Herts System's customer subscriber
base due primarily to additional activated plant in 1994 and 1995. The South
Herts System served approximately 16,500 basic cable television subscribers,
18,600 residential telephony subscribers and 610 business telephony
subscribers at June 30, 1995 as compared to approximately 10,400 basic cable
television subscribers, 9,100 residential telephony subscribers and 100
business telephony subscribers at June 30, 1994. Changes to Bell Cablemedia
South Herts' systems for collecting period end statistics have resulted in a
one-off downward adjustment of 1,003 residential telephony customers, which is
incorporated in the number of telephony customers at June 30, 1995 above.
Operating, general and administrative expenses increased $761,281 for the
three months ended June 30, 1995 over the corresponding period in 1994 from
$3,205,602 in 1994 to $3,966,883 in 1995. Operating, general and
administrative expenses increased $2,406,393 for the six months ended June 30,
1995 over the corresponding period in 1994 from $5,386,798 in 1994 to
$7,793,191 in 1995. These increases were primarily due to increases in
personnel costs, programming costs and marketing costs during 1995 as compared
to 1994. Such increases are related to the growth in the South Herts System's
size and subscriber base.
Management fees and allocated overhead from the General Partner increased by
$737,017 for the three months ended June 30, 1995, over the corresponding
period in 1994 from $356,288 in 1994 to $1,093,305 in 1995. Management fees
and allocated overhead from the General Partner increased by $667,504 for the
six months ended June 30, 1995 over the similar period in 1994 from $743,621
in 1994 to $1,411,125 in 1995. These increases were generally due to an
increase in allocated overhead and the payment of a $266,267 financing fee in
connection with Bell Cablemedia South Herts' Pound Sterling25,000,000
revolving and term loan credit facility agreement entered into in April 1995.
Depreciation and amortization expense increased $250,073 for the three months
ended June 30, 1995, over the corresponding period in 1994, from $808,182 in
1994 to $1,058,255 in 1995. Depreciation and amortization expense increased
$554,022 for the six months ended June 30, 1995 over the similar period in
1994 from $1,518,551 in 1994 to $2,072,573 in 1995. These increases were due
to increases in the Partnership's depreciable asset base.
Interest expense increased by $350,494 for the three months ended June 30,
1995 over the corresponding period in 1994, from $224,422 in 1994 to $574,916
in 1995. Interest expense increased $729,116 for the six months ended June
30, 1995 over the similar period in 1994 from $331,768 in 1994 to $1,060,884
in 1995. These increases were generally due to an increase in outstanding
indebtedness during the 1995 period.
Interest income fell by $73,046 for the three months ended June 30, 1995, over
the corresponding period in 1994, from $73,046 in 1994 to $0 in 1995.
Interest income fell by $123,166 for the six months ended June 30, 1995, over
the corresponding period in 1994, from $123,166 in 1994 to $0 in 1995. The
reduction in interest income was the result of a lack of funds available for
investment during 1995 as compared to balances invested during 1994.
Net loss increased by $17,879 for the three months ended June 30, 1995, over
the corresponding period in 1994, from $1,918,900 in 1994 to $1,936,779 in
1995. Net loss increased by $166,766 for the six months ended June 30, 1995,
over the corresponding period in 1994, from $3,233,059 in 1994 to $3,399,825
in 1995. The increase in net loss was due to the increase in expenses
discussed above exceeding the increase in revenues.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27 Financial Data Schedule
b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTH HERTFORDSHIRE UNITED
KINGDOM FUND, LTD.
a Colorado limited partnership
BY: FAWNSPRING LIMITED
__________________________
Its General Partner
BY: /s/ William Anderson
_________________________
William Anderson
Director
August 11, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,124,986
<SECURITIES> 0
<RECEIVABLES> 3,611,112
<ALLOWANCES> 757,634
<INVENTORY> 0
<CURRENT-ASSETS> 4,981,787
<PP&E> 80,835,777
<DEPRECIATION> 7,532,149
<TOTAL-ASSETS> 78,285,415
<CURRENT-LIABILITIES> 30,645,500
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 30,555,460<F1>
<TOTAL-LIABILITY-AND-EQUITY> 78,285,415
<SALES> 3,966,334
<TOTAL-REVENUES> 3,966,334
<CGS> 1,058,255
<TOTAL-COSTS> 1,058,255
<OTHER-EXPENSES> 5,060,188
<LOSS-PROVISION> (49,137)
<INTEREST-EXPENSE> 574,916
<INCOME-PRETAX> (1,936,779)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,936,779)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,936,779)
<EPS-PRIMARY> (33.68)
<EPS-DILUTED> (33.68)
<FN>
<F1>Comprised of Partners' contributed capital of $48,818,997 less accumulated
losses of $18,263,537
</FN>
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