FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 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
March 31, December 31,
1995 1994
--------- ------------
ASSETS:
CASH AND CASH EQUIVALENTS $529,516 $139,307
RECEIVABLES
Other receivables 2,831,968 2,807,303
INVESTMENT IN CABLE TELEVISION AND
TELECOMMUNICATIONS PROPERTIES, net
of accumulated depreciation and amortization
of $6,649,281 and $5,394,293 at March 31,
1995 and December 31, 1994 respectively 74,657,420 70,225,246
PREPAID EXPENSES AND OTHER ASSETS 527,030 301,754
----------- ------------
Total assets $78,545,934 $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 BALANCE SHEETS
March 31, December 31,
1995 1994
----------- -----------
LIABILITIES:
Accounts payable to affiliates and
related parties $15,063,572 $6,028,108
Trade accounts payable 5,416,724 3,160,657
Accrued liabilities 3,160,189 8,226,047
Note payable 3,363,832 4,446,268
----------- ----------
Total liabilities 27,004,317 21,861,080
----------- ----------
MINORITY INTERESTS 17,874,701 18,553,653
----------- ----------
PARTNERS' CAPITAL (DEFICIT):
General Partner
Contributed capital 1,000 1,000
Accumulated deficit (160,551) (145,921)
----------- ----------
(159,551) (144,921)
----------- ----------
Limited Partners
Net contributed capital (56,935 units outstand
at March 31, 1995 and December 31, 1994
respectively) 48,817,997 48,817,997
Accumulated deficit (15,613,298) 14,164,882)
----------- ----------
33,204,699 34,653,115
----------- ----------
Currency translation adjustment 621,768 (1,449,317)
----------- ----------
Total partners' capital 33,666,916 33,058,877
----------- ----------
Total liabilities and partners' capital $78,545,934 $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
For the three months ended
March 31,
--------------------------
1995 1994
---------- ----------
REVENUES $3,502,416 $1,611,079
COSTS AND EXPENSES:
Operating, general and administrative 3,826,308 2,181,196
Management fees and allocated
overhead from the General Partner 317,820 387,333
Depreciation and amortization 1,014,318 710,369
----------- -----------
OPERATING LOSS (1,656,030) (1,667,819)
OTHER INCOME (EXPENSE):
Interest expense (485,968) (107,346)
Interest income -- 50,120
----------- -----------
LOSS BEFORE MINORITY INTERESTS (2,141,998) (1,725,045)
Minority interests 678,952 410,886
----------- -----------
NET LOSS $(1,463,046) $(1,314,159)
ALLOCATION OF NET LOSS:
General Partner $(14,630) $(13,142)
Limited Partners (1,448,416) (1,301,017)
NET LOSS PER LIMITED PARTNERSHIP UNIT ($25.44) (27.00)
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 56,935 48,189
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
For the three months ended
March 31,
--------------------------
1995 1994
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(1,463,046) $(1,314,159)
Adjustments to reconcile net loss to net
cash used in operating activities:
Minority interests (678,952) (410,886)
Depreciation and amortization 1,014,318 710,369
Increase in other receivables (24,665) (205,331)
Increase in prepaid expenses and
other assets (225,276) (300,783)
Decrease in accounts payable to
related parties (790,088) -
(Decrease) increase in trade accounts
payable and accrued liabilities (3,762,442) 102,486
----------- -----------
Net Cash used in operating activities (5,930,151) (1,418,304)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction costs for cable television/
telephony system (5,687,162) (7,918,956)
Increase in construction accounts payable 952,651 287,167
----------- -----------
Net cash used in investing activities (4,734,511) (7,631,789)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital, net of syndication
costs and sales commissions - 8,575,838
Decrease in note payable (1,082,436) (53,112)
Increase in net subscriptions receivable - (1,022,925)
Decrease in accounts payable to affiliates - (663,268)
Proceeds from shareholder loans 9,825,552 -
----------- -----------
Net cash provided by financing activities 8,743,116 6,836,533
----------- -----------
Effect of currency exchange rate changes 2,311,755 223,969
----------- -----------
Increase(decrease) in cash and cash equivalents 390,209 (1,989,591)
Cash and cash equivalents, beginning of period 139,307 9,940,929
----------- -----------
Cash and cash equivalents, end of period $529,516 $7,951,338
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $560,280 $20,226
Loss on forward contracts $ - $19,390
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
March 31, 1995 and its results of operations and cash flows for the three
month periods ended March 31, 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 March 31, 1995, the network under
construction consisted of approximately 550 miles of cable plant, which passed
approximately 81,500 homes. At March 31, 1995 the South Herts System's cable
television subscribers totalled approximately 15,000 and the South Herts
System's residential telephone customers totalled approximately 17,200. In
addition, the South Herts System provided telephony services to 550 businesses
in its franchise area.
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 March
31,1995, 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 Sterling 3,400,000 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
Sterling 6,800,000 in Bell Cablemedia South Herts, of which Pound
Sterling 2,266,600 was funded in November 1993 for 22,666 Class B shares. In
June 1994, the Sandler Group invested Pound Sterling 3,273,232 for 32,732
Class B shares and Jones Intercable of South Hertfordshire, Inc. invested
Pound Sterling 503,283 for 5,033 Class B shares. In July 1994, the Sandler
Group invested Pound Sterling 1,800,000 for 18,000 Class B shares and Jones
Intercable of South Hertfordshire Inc. invested Pound Sterling 466,800 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 Sterling 5,108,900 in Bell Cablemedia South Herts for 51,089
Class A shares and BCM invested Pound Sterling 2,554,600 in Bell Cablemedia
South Herts for 25,546 Class A shares. In November 1994, the Partnership
invested Pound Sterling 1,410,000 in Bell Cablemedia South Herts for 14,100
Class A shares and BCM invested Pound Sterling 705,000 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, a wholly owned subsidiary of BCM (the "General Partner"). 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 26.3 percent equity interest (as of April 5, 1995), 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 March 31, 1995 and 1994 were $223,870 and $140,604
respectively. Of these amounts, $0 and $60,049 were capitalized in the
investment in cable television and telecommunications properties on the
Unaudited Consolidated Balance Sheets and $223,870 and $80,555 were expensed
on the Unaudited Consolidated Statements of Operations for the three months
ended March 31, 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
March 31, 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 $93,950 and $306,778
respectively.
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 the three months ended March 31, 1995 and
1994, no such interest had been charged to the Partnership by the General
Partner or its affiliates.
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 U.S. 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 U.S. $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 March 31, 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 March 31, 1995, the South Herts System had received $15,525,047
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
Sterling 800,000. 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 March 31, 1995 and 1994, Bell Cablemedia South Herts
had recorded interest expense of $19,439 and $20,232 respectively on this
loan. In March 1995, the bank financing for the office/headend building was
repaid.
On April 18, 1995 Bell Cablemedia South Herts entered into an
agreement with two major banks to provide a Pound Sterling 25,000,000
revolving and term loan facility maturing on December 31, 2003 (the "Facility
Agreement").
The Facility Agreement 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 Sterling 25,000,000. The
availability of Facility A of Pound Sterling 16,000,000 is subject to
certain conditions which have currently been satisfied and amounts drawn
down under Facility A bear interest at sterling LIBOR plus a margin of
2.5%. The availability of Facility B of Pound Sterling 25,000,000 is
subject to certain conditions including a restriction based on annualized
operating cash flow, which has not currently been satisfied. Amounts drawn
down under Facility B will bear interest at sterling LIBOR plus a margin
ranging from 2.0% to 0.75% depending on the ratio of Facility B bank debt
to annualized operating cash flow.
The Facility Agreement contains various covenants including financial
covenants such as a cumulative revenue test, a homes marketed test, bank debt
ratio, interest cover ratio, 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 Facility 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 or deferred management fees may not
be made prior to December 31, 1997. Such payments will be permitted
thereafter only if the bank debt ratio (the ratio of bank debt to annualized
operating cash flow) 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 Facility Agreement contains certain events of default including
non-payment of amounts due under the Facility Agreement, breaches of
representations and covenants (including financial ratios) contained in the
Facility Agreement, cross-default to certain other indebtedness of Bell
Cablemedia South Herts and certain bankruptcy and insolvency events.
The obligations of Bell Cablemedia South Herts under the Facility
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.
The first drawdown of Pound Sterling 11,000,000 under the Facility
Agreement occurred during April 1995 and was used to repay the temporary loans
made to Bell Cablemedia South Herts by BCM since November 1994. The General
Partner believes that the Bell Cablemedia South Herts Facility 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 telephone
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 telephone services. This agreement expires
April 16, 1996.
As of March 31, 1995 approximately 87 percent of the South Herts
System had been constructed. 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 March 31, 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 March 31,
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 March 31, 1995
the total amount invested by the Partnership was approximately $48,800,000.
Bell Cablemedia South Herts provides a local telephone 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 telephone 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 Sterling 3,400,000 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
Sterling 6,800,000 in Bell Cablemedia South Herts of which Pound
Sterling 2,266,600 was funded in November 1993 for 22,666 Class B shares. In
June 1994 the Sandler Group invested Pound Sterling 3,273,232 for 32,732 Class
B shares and Jones Intercable of South Hertfordshire, Inc. invested Pound
Sterling 503,283 for 5,033 Class B shares. In July 1994, the Sandler Group
invested Pound Sterling 1,800,000 for 18,000 Class B shares and Jones
Intercable of South Hertfordshire, Inc. invested Pound Sterling 466,800 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 Sterling 5,108,900 in Bell Cablemedia South Herts for 51,089 Class A
shares and BCM invested Pound Sterling 2,554,600 in Bell Cablemedia South
Herts for 25,546 Class A shares. In November 1994, the Partnership invested
Pound Sterling 1,410,000 in Bell Cablemedia South Herts for 14,100 Class A
shares and BCM invested Pound Sterling 705,000 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, a
wholly owned subsidiary of BCM (the "General Partner").
BCM, through its majority-owned subsidiaries and the companies in
which it holds minority interests, including Videotron Holdings Plc, in which
BCM owns a 26.3 percent equity interest, holds exclusive cable television
licenses and related nonexclusive 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 March 31, 1995 the
Partnership has cash balances of $40 and approximately $335,000 receivable
from Bell Cablemedia South Herts, most of which will be utilized by the
payment of invoices received in April/May 1995. 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 three months of 1995,
Bell Cablemedia South Herts had approximately $5,900,000 of capital
expenditures. All of these expenditures were for the construction of the
South Herts System and were principally funded by advances from affiliates of
BCM. Additional capital expenditures totalling approximately $7,600,000 will
be required through 1995 to continue construction of the South Herts System.
Such expenditures are expected to be funded through debt financing.
In July 1992, Bell Cablemedia South Herts entered into an agreement
with a bank to refinance its primary office/headend building for Pound
Sterling 800,000. 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 Sterling 25,000,000
revolving and term loan facility maturing on December 31, 2003 (the "Facility
Agreement").
The Facility Agreement 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 Sterling 25,000,000. The
availability of Facility A of Pound Sterling 16,000,000 is subject to
certain conditions which have currently been satisfied and amounts drawn
down under Facility A bear interest at sterling LIBOR plus a margin of
2.5%. The availability of Facility B of Pound Sterling 25,000,000 is
subject to certain conditions including a restriction based on annualized
operating cash flow, which has not currently been satisfied. Amounts drawn
down under Facility B will bear interest at sterling LIBOR plus a margin
ranging from 2.0% to 0.75% depending on the ratio of Facility B bank debt
to annualized operating cash flow.
The Facility Agreement contains various covenants including financial
covenants such as a cumulative revenue test, a homes marketed test, bank debt
ratio, interest cover ratio, 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 Facility 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 or deferred management fees may not
be made prior to December 31, 1997. Such payments will be permitted
thereafter only if the bank debt ratio (the ratio of bank debt to annualized
operating cash flow) 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 Facility Agreement contains certain events of default including
non-payment of amounts due under the Facility Agreement, breaches of
representations and covenants (including financial ratios) contained in the
Facility Agreement, cross-default to certain other indebtedness of Bell
Cablemedia South Herts and certain bankruptcy and insolvency events.
The obligations of Bell Cablemedia South Herts under the Facility
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.
The first drawdown of Pound Sterling 11,000,000 under the Facility
Agreement occurred during April 1995 and was used to repay the temporary loans
made to Bell Cablemedia South Herts by BCM since November 1994. The General
Partner believes that the Facility 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 $1,891,337 for the three months
ended March 31, 1995, over the corresponding period in 1994 from $1,611,079
in 1994 to $3,502,416 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. The South Herts System
served approximately 15,000 basic cable television subscribers, 17,200
residential telephony subscribers and 550 business telephony subscribers at
March 31, 1995 as compared to approximately 8,300 basic cable television
subscribers, 7,800 residential telephony subscribers and 100 business
telephony subscribers at March 31, 1994.
Operating, general and administrative expenses increased $1,645,112
for the three months ended March 31, 1995 over the corresponding period in
1994 from $2,181,196 in 1994 to $3,826,308 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
reduced by $69,513 for the three months ended March 31, 1995, over the
corresponding period in 1994 from $387,333 in 1994 to $317,820 in 1995. These
decreases were generally due to a reduction in allocated overhead.
Depreciation and amortization expense increased $303,949 for the
three months ended March 31, 1995, over the corresponding period in 1994, from
$710,369 in 1994 to $1,014,318 in 1995. These increases were due to increases
in the Partnership's depreciable asset base.
Interest expense increased by $378,622 for the three months ended
March 31, 1995 over the corresponding period in 1994, from $107,346 in 1994 to
$485,968 in 1995. These increases were generally due to an increase in
outstanding indebtedness during the 1995 period (principally the temporary
loans from BCM described above).
Interest income fell by $50,120 for the three months ended March 31,
1995, over the corresponding period in 1994, from $50,120 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 $148,887 for the three months ended March 31,
1995, over the corresponding period in 1994, from $1,314,159 in 1994 to
$1,463,046 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
27.1 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
May 15, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 529,516
<SECURITIES> 0
<RECEIVABLES> 3,638,739
<ALLOWANCES> 806,771
<INVENTORY> 0
<CURRENT-ASSETS> 3,888,514
<PP&E> 81,306,701
<DEPRECIATION> 6,649,281
<TOTAL-ASSETS> 78,545,934
<CURRENT-LIABILITIES> 27,004,317
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 33,666,916<F1>
<TOTAL-LIABILITY-AND-EQUITY> 78,545,934
<SALES> 3,502,416
<TOTAL-REVENUES> 3,502,416
<CGS> 1,014,318
<TOTAL-COSTS> 1,014,318
<OTHER-EXPENSES> 4,309,206
<LOSS-PROVISION> 165,077
<INTEREST-EXPENSE> 485,968
<INCOME-PRETAX> (1,463,046)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,463,046)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,463,046)
<EPS-PRIMARY> (25.44)
<EPS-DILUTED> (25.44)
<FN>
<F1>Comprised of Partners' contributed capital of $48,818,997 less accumulated
losses of $15,152,081.
</FN>
</TABLE>
