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 September 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
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
--------------- --------------
<S> <C> <C>
ASSETS:
- -------
CASH AND CASH EQUIVALENTS $780,055 $139,307
RECEIVABLES
Other receivables 4,158,105 2,807,303
INVESTMENT IN CABLE TELEVISION AND 73,827,210 70,225,246
TELECOMMUNICATIONS PROPERTIES, net of
accumulated depreciation and amortization of
$8,561,326 and $5,394,293 at September 30, 1995
and December 31, 1994 respectively
PREPAID EXPENSES AND OTHER ASSETS 1,132,398 301,754
--------------- --------------
Total assets $79,897,768 $73,473,610
LIABILITIES:
Accounts payable to affiliates and related parties $1,015,169 $6,028,108
Trade accounts payable 3,075,647 3,160,657
Accrued liabilities 5,782,304 8,226,047
Note payable 25,060,885 4,446,268
-------------- --------------
Total liabilities 34,934,005 21,861,080
-------------- --------------
MINORITY INTERESTS 16,522,194 18,553,653
PARTNERS' CAPITAL (DEFICIT):
General Partner
Contributed capital 1,000 1,000
Accumulated deficit (196,303) (145,921)
-------------- --------------
(195,303) (144,921)
-------------- --------------
Limited Partners
Net contributed capital (56,935 units outstanding 48,817,997 48,817,997
at September 30, 1995 and December 31, 1994,
respectively)
Accumulated deficit (19,152,676) (14,164,882)
-------------- --------------
29,665,321 34,653,115
-------------- --------------
Currency translation adjustment (1,028,449) (1,449,317)
-------------- --------------
Total partners' capital 28,441,569 33,058,877
-------------- --------------
Total liabilities and partners' capital $79,897,768 $73,473,610
</TABLE>
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 nine months ended
September 30, September 30,
------------------------------------ -----------------------------------
1995 1994 1995 1994
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $4,375,399 $2,298,873 $11,844,149 $5,887,823
COSTS AND EXPENSES:
Operating, general and administrative 4,412,595 3,938,301 12,205,786 9,325,099
Management fees and allocated
overhead from the General Partner 703,291 393,968 2,114,416 1,137,589
Depreciation and amortization 1,088,512 918,838 3,161,085 2,437,389
---------------- ---------------- ---------------- ---------------
OPERATING LOSS (1,828,999) (2,952,234) (5,637,138) (7,012,254)
OTHER INCOME (EXPENSE):
Interest expense (598,950) (5,950) (1,659,834) (337,718)
Interest income - 53,426 - 176,592
---------------- ---------------- ---------------- ---------------
LOSS BEFORE MINORITY INTERESTS (2,427,949) (2,904,758) (7,296,972) (7,173,380)
Minority interests 789,598 1,319,987 2,258,796 2,355,550
---------------- ---------------- ---------------- ---------------
NET LOSS $(1,638,351) $(1,584,771) $(5,038,176) $(4,817,830)
ALLOCATION OF NET LOSS:
General Partner $(16,384) $(15,848) $(50,382) $(48,178)
Limited Partners $(1,621,967) $(1,568,923) $(4,987,794) $(4,769,652)
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(28.49) $(27.56) $(87.61) $(88.31)
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP 56,935 56,935 56,935 54,012
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 nine months ended
September 30,
-----------------------------------
1995 1994
---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,038,176) $(4,817,830)
Adjustments to reconcile net loss to net cash used in operating activities:
Minority interests (2,258,796) (2,355,550)
Depreciation and amortization 3,161,085 2,437,389
Increase in other receivables (1,350,802) (608,764)
Increase in prepaid expenses and other assets (830,644) (47,094)
Decrease in accounts payable to related parties (638,184) --
Increase in trade accounts payable and accrued liabilities 156,937 2,420,339
---------------- ---------------
Net cash used in operating activities (6,798,580) (2,971,510)
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction payments for cable television/telephony system (9,454,687) (29,004,642)
---------------- ---------------
Net cash used in investing activities (9,454,687) (29,004,642)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital, net of syndication costs and sales
commissions - 12,734,812
Increase (decrease) in borrowings 20,614,617 (148,704)
Decrease in net subscriptions receivable - 531,300
Increase in accounts payable to affiliates - 709,711
Repayment of shareholder loans (4,374,755) --
Proceeds from sale of common stock by subsidiary - 8,797,191
---------------- ---------------
Net cash provided by financing activities 16,239,862 22,624,310
---------------- ---------------
Effect of currency exchange rate changes 654,153 3,284,519
Increase (decrease) in cash and cash equivalents 640,748 (6,067,323)
Cash and cash equivalents, beginning of period 139,307 9,940,929
---------------- ---------------
Cash and cash equivalents, end of period $780,055 $3,873,606
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $1,251,094 $322,995
</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
September 30, 1995 and its results of operations and cash flows for the
nine month periods ended September 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 September 30, 1995, the network under
construction consisted of approximately 550 miles of cable plant, which passed
approximately 82,600 homes. At September 30, 1995 the South Herts System's
cable television subscribers totalled approximately 17,700 and the South Herts
System's residential telephony customers totalled approximately 20,100. In
addition, the South Herts System provided telephony services to 700 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 September
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 September 30, 1995 and 1994 were $305,069
and $208,023 respectively. All of these amounts were expensed on the
Unaudited Consolidated Statements of Operations for the three months ended
September 30, 1995 and 1994 respectively.
Consulting fees paid or payable by Bell Cablemedia South Herts for the nine
months ended September 30, 1995 and 1994 were $770,501 and $423,401
respectively. All of these amounts were expensed on the Unaudited
Consolidated Statements of Operations for the nine months ended September 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 September 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
$398,222 and $185,945 respectively. During the nine months ended September
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 $1,077,648 and $714,188, 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 nine months ended September 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.
Limited Partner investments in Bell Cablemedia South Herts were made at an
average exchange rate of $1.62 per United Kingdom pound sterling. The average
exchange rate used in the preparation of this report for the nine months ended
September 30, 1995 was $1.59 per United Kingdom pound sterling and the closing
exchange rate at September 30, 1995 was $1.58 per United Kingdom pound
sterling.
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 September 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.
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 September 30, 1995 and 1994, Bell Cablemedia South
Herts had recorded interest expense of $0 and $34,152 respectively on this
loan. In March 1995, the bank financing for the office/headend building was
repaid. For the nine months ended September 30, 1995 and 1994, Bell
Cablemedia South Herts had recorded interest expense of $19,439 and $74,886
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 Sterling14.0 million 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 September 30, 1995 approximately 88 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 September 30, 1995, the network
under construction consisted of approximately 550 miles of cable plant,
passing approximately 82,600 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 September 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 September 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
September 30, 1995 the Partnership had a receivable from BCM of approximately
$30,000 but current liabilities of approximately $160,000. 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 nine months of 1995, Bell
Cablemedia South Herts had approximately $6,800,000 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 Sterling14.0 million 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 $2,076,526 for the three months ended
September 30, 1995, over the corresponding period in 1994 from $2,298,873 in
1994 to $4,375,399 in 1995. Revenues of the Partnership increased $5,956,326
for the nine months ended September 30, 1995, over the similar period in 1994,
increasing from $5,887,823 in 1994 to $11,844,149 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 17,700 basic cable television subscribers,
20,100 residential telephony subscribers and 700 business telephony
subscribers at September 30, 1995 as compared to approximately 11,700 basic
cable television subscribers, 11,800 residential telephony subscribers and 300
business telephony subscribers at September 30, 1994.
Operating, general and administrative expenses increased $474,294 for the
three months ended September 30, 1995 over the corresponding period in 1994
from $3,938,301 in 1994 to $4,412,595 in 1995. Operating, general and
administrative expenses increased $2,880,687 for the nine months ended
September 30, 1995 over the corresponding period in 1994 from $9,325,099 in
1994 to $12,205,786 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 $309,323 for the three months ended September 30, 1995 over the
corresponding period in 1994 from $393,968 in 1994 to $703,291 in 1995.
Management fees and allocated overhead from the General Partner increased by
$976,827 for the nine months ended September 30, 1995 over the similar period
in 1994 from $1,137,589 in 1994 to $2,114,416 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 $169,674 for the three
months ended September 30, 1995, over the corresponding period in 1994, from
$918,838 in 1994 to $1,088,512 in 1995. Depreciation and amortization expense
increased $723,696 for the nine months ended September 30, 1995 over the
similar period in 1994 from $2,437,389 in 1994 to $3,161,085 in 1995. These
increases were due to increases in the Partnership's depreciable asset base.
Interest expense increased by $593,000 for the three months ended September
30, 1995 over the corresponding period in 1994, from $5,950 in 1994 to
$598,950 in 1995. Interest expense increased $1,322,116 for the nine months
ended September 30, 1995 over the similar period in 1994 from $337,718 in 1994
to $1,659,834 in 1995. These increases were generally due to an increase in
outstanding indebtedness during the 1995 period.
Interest income fell by $53,426 for the three months ended September 30,
1995, over the corresponding period in 1994, from $53,426 in 1994 to $0 in
1995. Interest income fell by $176,592 for the nine months ended September
30, 1995, over the corresponding period in 1994, from $176,592 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 $53,580 for the three months ended September 30,
1995, over the corresponding period in 1994, from $1,584,771 in 1994 to
$1,638,351 in 1995. Net loss increased by $220,346 for the nine months ended
September 30, 1995, over the corresponding period in 1994, from $4,817,830 in
1994 to $5,038,176 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
November 7, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 780,055
<SECURITIES> 0
<RECEIVABLES> 3,190,217
<ALLOWANCES> 767,610
<INVENTORY> 0
<CURRENT-ASSETS> 6,070,558
<PP&E> 82,388,536
<DEPRECIATION> 8,561,326
<TOTAL-ASSETS> 79,897,768
<CURRENT-LIABILITIES> 34,934,005
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 28,441,569<F1>
<TOTAL-LIABILITY-AND-EQUITY> 79,897,768
<SALES> 4,375,399
<TOTAL-REVENUES> 4,375,399
<CGS> 1,088,512
<TOTAL-COSTS> 1,088,512
<OTHER-EXPENSES> 5,115,886
<LOSS-PROVISION> 9,976
<INTEREST-EXPENSE> 598,950
<INCOME-PRETAX> (1,638,351)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,638,351)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,638,351)
<EPS-PRIMARY> (28.49)
<EPS-DILUTED> (28.49)
<FN>
<F1>Comprised of Partners' contributed capital of $48,818,997 less accumulated
losses of $20,377,428
</FN>
</TABLE>
