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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 June 30, 1996.
[ ] 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 | |
<PAGE>
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
---------- ------------
ASSETS:
CASH AND CASH EQUIVALENTS ................ $1,070,781 $ 676,731
RECEIVABLES
Other receivables net of allowances
for doubtful accounts of $795,261 and
$697,594 at June 30, 1996 and December
31, 1995, respectively ................. 3,311,423 3,394,542
PREPAID EXPENSES ......................... 364,175 360,602
--------- ---------
CURRENT ASSETS ........................... 4,746,379 4,431,875
INVESTMENT IN CABLE TELEVISION AND
TELECOMMUNICATIONS PROPERTIES, net of
accumulated depreciation and
amortization of $11,941,035 and
$9,490,853 at June 30, 1996 and
December 31, 1995, respectively ........ 74,918,438 75,073,378
OTHER ASSETS ............................. 689,295 734,689
----------- -----------
Total assets ............ $80,354,112 $80,239,942
----------- -----------
The accompanying notes to unaudited financial statements are an integral
part of these unaudited balance sheets.
2
<PAGE>
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
------------ ------------
LIABILITIES:
Accounts payable to affiliates and
related parties .............................. $ 5,304,070 $ 2,232,050
Trade accounts payable ....................... 4,012,555 4,652,911
Accrued liabilities .......................... 2,944,837 3,720,929
Short term obligations under capital leases .. 883,733 840,441
------------ ------------
Current liabilities ................. 13,145,195 11,446,331
Long term debt ............................... 26,725,360 24,220,560
Long term obligations under capital leases .. 1,628,285 2,084,780
------------ ------------
Total liabilities .................. 41,498,840 37,751,671
------------ ------------
COMMITMENTS AND CONTINGENCIES .................. -- --
MINORITY INTERESTS ............................. 12,794,730 13,948,743
PARTNERS' CAPITAL (DEFICIT):
General Partner
Contributed capital ........................ 1,000 1,000
Accumulated deficit ........................ (232,069) (207,441)
------------ ------------
(231,069) (206,441)
------------ ------------
Limited Partners
Net contributed capital (56,935 units
outstanding at June 30, 1996 and
December 31, 1995 respectively) .......... 48,817,997 48,817,997
Accumulated deficit ............................ (22,693,506) (20,255,368)
------------ ------------
26,124,491 28,562,629
------------ ------------
Currency translation adjustment ................ 167,120 183,340
------------ ------------
Total partners' capital ........................ 26,060,542 28,539,528
------------ ------------
Total liabilities and partners' capital ........ $ 80,354,112 $ 80,239,942
------------ ------------
The accompanying notes to unaudited financial statements are an integral
part of these unaudited balance sheets.
3
<PAGE>
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,
------------------------------- -------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES ........................................... $ 5,019,204 $ 3,966,334 $ 9,971,811 $ 7,468,750
COSTS AND EXPENSES:
Operating ........................................ 2,256,075 1,852,883 4,621,737 3,460,096
Selling, general and administrative .............. 1,476,645 2,114,000 3,147,120 4,333,095
Management fees and allocated
overhead from the General Partner .............. 1,226,098 1,093,305 2,096,691 1,411,125
Depreciation and amortization .................... 1,224,440 1,058,255 2,403,228 2,072,573
----------- ----------- ----------- -----------
OPERATING LOSS ..................................... (1,164,054) (2,152,109) (2,296,965) (3,808,139)
OTHER INCOME (EXPENSE):
Interest expense ................................. (662,471) (574,916) (1,324,121) (1,060,884)
Interest income .................................. 8,978 -- 12,417 --
----------- ----------- ----------- -----------
LOSS BEFORE MINORITY INTERESTS ..................... (1,817,547) (2,727,025) (3,608,669) (4,869,023)
Minority interests ............................... 574,459 790,246 1,145,903 1,469,198
----------- ----------- ----------- -----------
NET LOSS ........................................... $(1,243,088) $(1,936,779) $(2,462,766) $(3,399,825)
ALLOCATION OF NET LOSS:
General Partner .................................. $ (12,431) $ (19,368) $ (24,628) $ (33,998)
Limited Partners ................................. $(1,230,657) $(1,917,411) $(2,438,138) $(3,365,827)
NET LOSS PER LIMITED
PARTNERSHIP UNIT ................................. $ (21.61) $ (33.68) $ (42.82) $ (59.12)
WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP
UNITS OUTSTANDING ................................ 56,935 56,935 56,935 56,935
</TABLE>
The accompanying notes to unaudited financial statements are an integral
part of these unaudited statements.
4
<PAGE>
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended
June 30,
---------------------------
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..................................... $(2,462,766) $ (3,399,825)
Adjustments to reconcile net loss to
net cash used in operating activities:
Minority interests ........................... (1,145,903) (1,469,198)
Depreciation and amortization ................ 2,403,228 2,072,573
Increase in other receivables ................ (104,796) (46,175)
Decrease (increase) in prepaid
expenses and other assets .................. 230,496 (701,569)
Increase (decrease) in accounts payable
to related parties ......................... 3,074,480 (952,354)
Decrease in trade accounts payable and
accrued liabilities ........................ (933,140) (1,734,319)
----------- ------------
Net cash used in operating activities ..... 1,061,599 (6,230,867)
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction payments for cable
television/telephony system ................ (2,711,487) (6,882,227)
----------- ------------
Net cash used in investing activities ..... (2,711,487) (6,882,227)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings ....................... 2,445,760 17,114,678
Repayment of shareholder loans ............... -- (3,977,596)
Principal payments under capital leases ...... (408,726) --
----------- ------------
Net cash provided by financing activities . 2,037,034 13,137,082
----------- ------------
Effect of currency exchange rate changes ....... 6,904 961,691
Increase in cash and cash equivalents .......... 394,050 985,679
Cash and cash equivalents, beginning of period . 676,731 139,307
----------- ------------
Cash and cash equivalents, end of period ....... $ 1,070,781 $ 1,124,986
----------- ------------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid .................................. $ 1,054,184 $ 795,031
The accompanying notes to unaudited financial statements are an integral
part of these unaudited statements.
5
<PAGE>
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, 1995. 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, 1996 and its results of operations and
cash flows for the six month periods ended June 30, 1996 and 1995. 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, 1996, the network consisted of
approximately 550 miles of cable plant, which passed approximately 84,000 homes.
At June 30, 1996 the South Herts System's cable television customers totalled
approximately 19,850 and the South Herts System's residential telephony lines
totalled approximately 23,300. In addition, the South Herts System provided
telephony services to approximately 850 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 June 30, 1996, 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)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)6,800,000 in Bell
Cablemedia South Herts, of which (pound)2,266,600 was funded in November 1993
for 22,666 Class B shares. In June 1994, the Sandler Group invested
(pound)3,273,232 for 32,732 Class B shares and Jones Intercable of South
Hertfordshire, Inc. invested (pound)503,283 for 5,033 Class A shares. In July
1994, the Sandler Group invested (pound)1,800,000 for 18,000 Class B shares and
Jones Intercable of South Hertfordshire Inc. invested (pound)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") issued by BCM in connection with a planned public
offering of ADSs by BCM.
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)5,108,900 in Bell Cablemedia South
Herts for 51,089 Class A shares and BCM invested (pound)2,554,600 in Bell
Cablemedia South Herts for 25,546 Class A shares. In November 1994, the
Partnership invested (pound)1,410,000 in Bell Cablemedia South Herts for 14,100
Class A shares and BCM invested (pound)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 (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.
6
<PAGE>
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 was 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, 1996 and 1995 were $370,250 and $241,738 respectively. All of these amounts
were expensed on the Unaudited Consolidated Statements of Operations for the
three months ended June 30, 1996 and 1995 respectively.
Consulting fees paid or payable by Bell Cablemedia South Herts for the six
months ended June 30, 1996 and 1995 were $786,426 and $465,432 respectively. All
of these amounts were expensed on the Unaudited Consolidated Statements of
Operations for the six months ended June 30, 1996 and 1995 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, 1996 and 1995, 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 $855,848 and
$585,300 respectively. During the six months ended June 30, 1996 and 1995,
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 $1,310,265 and $679,426 respectively. These increases were due to an
increase in the provision of services by the General Partner in 1996 as compared
to 1995.
In connection with Bell Cablemedia South Herts' (pound)25,000,000 revolving
and term loan credit facility agreement entered into in April 1995, Bell
Cablemedia Management Limited, an affiliate of the General Partner, received a
1% financing fee. 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, 1996 and
1995, 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 six months ended
June 30, 1996 was $1.53 per United Kingdom pound sterling and the closing
exchange rate at June 30, 1996 was $1.55 per United Kingdom pound sterling.
7
<PAGE>
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
----------
On April 18, 1995 Bell Cablemedia South Herts entered into an agreement
with two major banks to provide a (pound)25,000,000 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)25,000,000. Amounts drawn down under Facility A bear interest at sterling
LIBOR plus a margin of 2.5%. The availability of Facility B of (pound)25,000,000
is subject to certain conditions which have now 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. At June 30, 1996
the average interest rate on this loan was 8.2%.
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)17.2 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.
8
<PAGE>
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, 1996,
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, 1996 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 may be terminated on 12 months'
notice by either party. 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)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)6,800,000 in Bell
Cablemedia South Herts of which (pound)2,266,600 was funded in November 1993 for
22,666 Class B shares. In June 1994 the Sandler Group invested (pound)3,273,232
for 32,732 Class B shares and Jones Intercable of South Hertfordshire, Inc.
invested (pound)503,283 for 5,033 Class A shares. In July 1994, the Sandler
Group invested (pound)1,800,000 for 18,000 Class B shares and Jones Intercable
of South Hertfordshire, Inc. invested (pound)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") issued by BCM in connection with a planned public
offering of ADSs by BCM.
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)5,108,900 in Bell Cablemedia
South Herts for 51,089 Class A shares and BCM invested (pound)2,554,600 in Bell
Cablemedia South Herts for 25,546 Class A shares. In November 1994, the
Partnership invested (pound)1,410,000 in Bell Cablemedia South Herts for 14,100
Class A shares and BCM invested (pound)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 (the
"General Partner"), a wholly owned subsidiary of BCM.
BCM, through its majority-owned subsidiaries and its interests in Bell
Cablemedia South Herts and 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.
9
<PAGE>
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, 1996 the
Partnership had current liabilities of approximately $400,000, most of which
were payable to the General Partner.
Bell Cablemedia South Herts. On April 18, 1995 Bell Cablemedia South Herts
entered into an agreement with two major banks to provide a (pound)25,000,000
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)25,000,000. Amounts drawn down under Facility A bear interest at sterling
LIBOR plus a margin of 2.5%. The availability of Facility B of (pound)25,000,000
is subject to certain conditions which have now been satisfied and amounts drawn
down under Facility B 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. At June 30, 1996
the average interest rate on this loan was 8.2%.
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)17.2 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 $1,052,870 for the three months ended
June 30, 1996, over the corresponding period in 1995 from $3,966,334 in 1995 to
$5,019,204 in 1996. Revenues of the Partnership increased $2,503,061 for the six
months ended June 30, 1996, over the corresponding period in 1995 from
$7,468,750 in 1995 to $9,971,811 in 1996. These increases were the result of
increases in the South Herts System's customer base due primarily to additional
activated plant in 1995. The South Herts System served approximately 19,850
basic cable television customers, 23,300 residential telephony lines and 850
business telephony customers at June 30, 1996 as compared to approximately
16,500 basic cable television customers, 18,600 residential telephony lines
and 600 business telephony customers at June 30, 1995.
Operating expenses increased $403,192 for the three months ended June 30,
1996 over the corresponding period in 1995 from $1,852,883 in 1995 to $2,256,075
in 1996. Operating expenses increased $1,161,641 for the six months ended June
30, 1996 over the corresponding period in 1995 from $3,460,096 in 1995 to
$4,621,737 in 1996. These increases relate to telephony and programming costs
arising from the growth in the South Herts' customer base.
10
<PAGE>
Selling, general and administrative expenses reduced $637,355 for the three
months ended June 30, 1996 over the corresponding period in 1995 from $2,114,000
in 1995 to $1,476,645 in 1996. Selling, general and administrative expenses
reduced $1,185,975 for the six months ended June 30, 1996 over the corresponding
period in 1995 from $4,333,095 in 1995 to $3,147,120 in 1996. These reductions
were primarily due to reductions in overhead costs, resulting from the provision
of additional services by the General Partner in 1996 as compared to 1995.
Management fees and allocated overhead from the General Partner
increased by $132,793 for the three months ended June 30, 1996 over the
corresponding period in 1995 from $1,093,305 in 1995 to $1,226,098 in 1996.
Management fees and allocated overhead from the General Partner increased
by $685,566 for the six months ended June 30, 1996 over the corresponding
period in 1995 from $1,411,125 in 1995 to $2,096,691 in 1996. These costs
relate to additional services provided by affiliates of the General Partner
in order to reduce overall costs by taking advantage of economies of scale
within the BCM Group. Overall, the aggregate of selling, general and
administrative expenses and management fees and allocated overhead from the
General Partner has declined for both the three and six month periods ended
June 30, 1996 compared with the corresponding periods of 1995.
Depreciation and amortization expense increased $166,185 for the three
months ended June 30, 1996, over the corresponding period in 1995, from
$1,058,255 in 1995 to $1,224,440 in 1996. Depreciation and amortization expense
increased $330,655 for the six months ended June 30, 1996, over the
corresponding period in 1995, from $2,072,573 in 1995 to $2,403,228 in 1996.
These increases were due to increases in the Partnership's depreciable
asset base.
Interest expense increased by $87,555 for the three months ended June 30,
1996 over the corresponding period in 1995, from $574,916 in 1995 to $662,471 in
1996. Interest expense increased by $263,237 for the six months ended June 30,
1996 over the corresponding period in 1995, from $1,060,884 in 1995 to
$1,324,121 in 1996. These increases were generally due to an increase in
outstanding indebtedness during the year ended June 30, 1996.
Interest income increased by $8,978 for the three months ended June 30,
1996, over the corresponding period in 1995, from $0 in 1995 to $8,978 in 1996.
Interest income increased by $12,417 for the six months ended June 30, 1996,
over the corresponding period in 1995, from $0 in 1995 to $12,417 in 1996. The
increases in interest income were the result of interest received on temporary
cash balances in the 1996 periods following revised treasury arrangements.
Net loss decreased by $693,691 for the three months ended June 30, 1996,
over the corresponding period in 1995, from $1,936,779 in 1995 to $1,243,088 in
1996. Net loss decreased by $937,059 for the six months ended June 30, 1996,
over the corresponding period in 1995, from $3,399,825 in 1995 to $2,462,766 in
1996. The reductions in net loss were due to the increases in revenue, which led
to increases in contribution margin, combined with reductions in overheads. The
effect of these factors was only partly offset by the increases in depreciation
and interest expenses.
11
<PAGE>
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
12
<PAGE>
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
/s/ William Anderson
BY:__________________________
William Anderson
Director
August 7, 1996.
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,070,781
<SECURITIES> 0
<RECEIVABLES> 4,106,684
<ALLOWANCES> 795,261
<INVENTORY> 0
<CURRENT-ASSETS> 4,746,379
<PP&E> 86,859,473
<DEPRECIATION> 11,941,035
<TOTAL-ASSETS> 80,354,112
<CURRENT-LIABILITIES> 13,145,195
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 26,060,542<F1>
<TOTAL-LIABILITY-AND-EQUITY> 80,354,112
<SALES> 5,019,204
<TOTAL-REVENUES> 5,019,204
<CGS> 1,224,440
<TOTAL-COSTS> 1,224,440
<OTHER-EXPENSES> 4,958,818
<LOSS-PROVISION> 28,169
<INTEREST-EXPENSE> 662,471
<INCOME-PRETAX> (1,243,088)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,243,088)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,243,088)
<EPS-PRIMARY> (21.61)
<EPS-DILUTED> (21.61)
<FN>
1 Comprised of Partners' contributed capital of $48,818,997 less accumulated
losses of $22,758,455.
</FN>
</TABLE>
