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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 March 31, 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
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State of organization I.R.S. employer I.D.#
Bell Cablemedia House, Upton Road, Watford, Hertfordshire, WD1 7EL, England
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Address of principal executive office
011 44 1923 444000
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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 / /
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SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
-------------- --------------
ASSETS:
- ------
CASH AND CASH EQUIVALENTS $ 385,505 $ 676,731
RECEIVABLES
Other receivables net of allowances
for doubtful accounts of $767,092
and $697,594 at March 31, 1996 and
December 31, 1995, respectively 3,087,789 3,394,542
PREPAID EXPENSES 216,350 360,602
------------- -------------
CURRENT ASSETS 3,689,644 4,431,875
INVESTMENT IN CABLE TELEVISION AND
TELECOMMUNICATIONS PROPERTIES, net
of accumulated depreciation and
amortization of $10,509,554 and
$9,490,853 at March 31, 1996 and
December 31, 1995, respectively 73,466,253 75,073,378
OTHER ASSETS 699,761 734,689
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Total assets $77,855,658 $80,239,942
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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,
1996 1995
-------------- --------------
LIABILITIES:
Accounts payable to affiliates and
related parties $2,718,638 $2,232,050
Trade accounts payable 3,284,743 4,652,911
Accrued liabilities 3,528,510 3,720,929
Short term obligations under capital
leases 856,160 840,441
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Current liabilities 10,388,051 11,446,331
Long term debt 25,645,200 24,220,560
Long term obligations under capital
leases 1,827,929 2,084,780
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Total liabilities 37,861,180 37,751,671
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COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTERESTS 13,143,075 13,948,743
PARTNERS' CAPITAL (DEFICIT):
General Partner
Contributed capital 1,000 1,000
Accumulated deficit (219,638) (207,441)
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(218,638) (206,441)
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Limited Partners
Net contributed capital (56,935
units outstanding at March 31,
1996 and December 31, 1995,
respectively) 48,817,997 48,817,997
Accumulated deficit (21,462,849) (20,255,368)
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27,355,148 28,562,629
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Currency translation adjustment (285,107) 183,340
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Total partners' capital 26,851,403 28,539,528
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Total liabilities and partners' capital $77,855,658 $80,239,942
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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,
--------------------------
1996 1995
------------ -----------
REVENUES $4,952,607 $3,502,416
COSTS AND EXPENSES:
Operating, general and administrative (4,036,137) (3,826,308)
Management fees and allocated
overhead from the General Partner (870,593) (317,820)
Depreciation and amortization (1,178,788) (1,014,318)
------------ -----------
OPERATING LOSS (1,132,911) (1,656,030)
OTHER INCOME (EXPENSE):
Interest expense (661,650) (485,968)
Interest income 3,439 --
------------ -----------
LOSS BEFORE MINORITY INTERESTS (1,791,122) (2,141,998)
Minority interests 571,444 678,952
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NET LOSS $(1,219,678) $(1,463,046)
ALLOCATION OF NET LOSS:
General Partner $(12,197) $(14,630)
Limited Partners $(1,207,481) $(1,448,416)
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(21.21) $(25.44)
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP 56,935 56,935
UNITS OUTSTANDING
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,
---------------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,219,678) $(1,463,046)
Adjustments to reconcile net loss to net
cash used in operating activities:
Minority interests (805,668) (678,952)
Depreciation and amortization 1,178,788 1,014,318
Decrease (increase) in other receivables 306,753 (24,665)
Decrease (increase) in prepaid expenses
and other assets 179,180 (225,276)
Increase (decrease) in accounts payable
to related parties 486,588 (790,088)
Decrease in trade accounts payable and
accrued liabilities (208,277) (3,762,442)
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Net cash used in operating activities (82,314) (5,930,151)
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction payments for cable
television/telephony system (923,973) (4,734,511)
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Net cash used in investing activities (923,973) (4,734,511)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings 1,424,640 --
Repayment of shareholder loans -- 9,825,552
Principal payments under capital leases (241,132) (1,082,436)
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Net cash provided by financing activities 1,183,508 8,743,116
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Effect of currency exchange rate changes (468,447) 2,311,755
(Decrease) increase in cash and cash equivalents (291,226) 390,209
Cash and cash equivalents, beginning of period 676,731 139,307
------------ ------------
Cash and cash equivalents, end of period $385,505 $529,516
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SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $606,833 $560,280
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,
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 March 31, 1996 and its results of
operations and cash flows for the three month periods ended March 31, 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 March 31, 1996, the network consisted
of approximately 550 miles of cable plant, which passed approximately 84,000
homes. At March 31, 1996 the South Herts System's cable television customers
totalled approximately 19,200 and the South Herts System's residential
telephony lines totalled approximately 22,300. In addition, the South Herts
System provided telephony services to over 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 March 31,
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
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 A 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")) 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 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 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.
(3) TRANSACTIONS WITH AFFILIATED ENTITIES
-------------------------------------
An affiliate of the General Partner is 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 March 31,
1996 and 1995 were $416,176 and $223,870 respectively. All of these amounts
were expensed on the Unaudited Consolidated Statements of Operations for the
three months ended March 31, 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 March 31, 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 $454,417
and $93,950 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, 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 three months
ended March 31, 1996 was $1.53 per United Kingdom pound sterling and the
closing exchange rate at March 31, 1996 was $1.53 per United Kingdom pound
sterling.
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 customer 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, 50 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 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 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 March
31, 1996 the average interest rate on this loan was 8.5%.
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 Sterling16.8 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
-----------
As of March 31, 1996 approximately 90 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 December 31, 1995, the South Herts System
passed approximately 83,400 homes and over 3,000 businesses, thereby complying
with the construction timetable in its license.
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, 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 March 31, 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
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 A 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") 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 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 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.
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, 1996 the Partnership had current liabilities of approximately
$350,000. 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. The General Partner will arrange for resources
to be made available for the Partnership to meet its obligations as they fall
due.
Bell Cablemedia South Herts. 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 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 March
31, 1996 the average interest rate on this loan was 8.5%
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 Sterling16.8 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 $1,450,191 for the three months ended
March 31, 1996, over the corresponding period in 1995 from $3,502,416 in 1995
to $4,952,607 in 1996. These increases were the result of increases in the
South Herts System's customer subscriber base due primarily to additional
activated plant in 1995. The South Herts System served approximately 19,200
basic cable television customers, 22,300 residential telephony lines and over
850 business telephony customers at March 31, 1996 as compared to
approximately 15,000 basic cable television customers, 17,800 residential
telephony lines and 550 business telephony customers at March 31, 1995.
Operating, general and administrative expenses increased $209,829 for the
three months ended March 31, 1996 over the corresponding period in 1995 from
$3,826,308 in 1995 to $4,036,137 in 1996. These increases were primarily due
to increases in telephony and programming costs, offset by reductions in
overhead costs resulting from the provision of additional services by the
General Partner in 1996 as compared to 1995. The increases in telephony and
programming costs are related to the growth in the South Herts system's size
and customer base.
Management fees and allocated overhead from the General Partner increased by
$552,773 for the three months ended March 31, 1996 over the corresponding
period in 1995 from $317,820 in 1995 to $870,593 in 1996. These increases were
partly due to an increase in allocated overhead due to the increased number of
customers and the provision of additional services by the General Partner in
1996 as compared to 1995. There was also an increase in management fees, due
to the increased number of customers.
Depreciation and amortization expense increased $164,470 for the three months
ended March 31, 1996, over the corresponding period in 1995, from $1,014,318
in 1995 to $1,178,788 in 1996. These increases were due to increases in the
Partnership's depreciable asset base resulting from the buildout of the South
Herts system.
Interest expense increased by $175,682 for the three months ended March 31,
1996 over the corresponding period in 1995, from $485,968 in 1995 to $661,650
in 1996. These increases were generally due to an increase in outstanding
indebtedness during the year ended March 31, 1996 under a credit facility,
entered into in April 1995, which was used to repay temporary loans from BCM
and to fund the construction of the network.
Interest income increased by $3,439 for the three months ended March 31, 1996,
over the corresponding period in 1995, from $0 in 1995 to $3,439 in 1996. The
increase in interest income was the result of interest received on temporary
cash balances in the 1996 period following improved treasury arrangements.
Net loss decreased by $243,368 for the three months ended March 31, 1996, over
the corresponding period in 1995, from $1,463,046 in 1995 to $1,219,678 in
1995. The reduction in net loss was due to the increase in revenue, which led
to an increase in contribution margin which exceeded the increases in
overheads and interest expenses.
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
May 14, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 385,505
<SECURITIES> 0
<RECEIVABLES> 3,854,881
<ALLOWANCES> 767,092
<INVENTORY> 0
<CURRENT-ASSETS> 3,689,644
<PP&E> 83,975,807
<DEPRECIATION> 10,509,554
<TOTAL-ASSETS> 77,855,658
<CURRENT-LIABILITIES> 10,388,051
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 26,851,403<FN>
<TOTAL-LIABILITY-AND-EQUITY> 77,855,658
<SALES> 4,952,607
<TOTAL-REVENUES> 4,952,607
<CGS> 1,178,788
<TOTAL-COSTS> 1,178,788
<OTHER-EXPENSES> 4,906,730
<LOSS-PROVISION> 69,498
<INTEREST-EXPENSE> 658,211
<INCOME-PRETAX> (1,219,678)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,219,678)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,219,678)
<EPS-PRIMARY> (21.21)
<EPS-DILUTED> (21.21)
<FN>
Comprised of Partners' contributed capital of $48,818,997 less accumulated
losses of $21,967,594
</FN>
</TABLE>
