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, 1997.
[ ] 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
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SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
------- ------------
ASSETS:
CASH AND CASH EQUIVALENTS $1,222,445 $2,200,982
RECEIVABLES Other receivables net
of allowances for doubtful
accounts of $868,893 and $765,634
at June 30, 1997 and December
31, 1996,
respectively 3,652,392 4,935,769
PREPAID EXPENSES 626,217 301,868
----------- -----------
CURRENT ASSETS 5,501,054 7,438,619
----------- -----------
INVESTMENT IN CABLE TELEVISION
AND TELECOMMUNICATIONS PROPERTIES,
net of accumulated depreciation
and amortization of $18,641,934
and $16,061,206 at June 30, 1997
and December 31, 1996, respectively 81,866,020 82,972,180
OTHER ASSETS 660,659 708,545
----------- -----------
Total assets $88,027,733 $91,119,344
----------- -----------
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
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SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
------- ------------
LIABILITIES:
Accounts payable to affiliates
and related parties $11,386,335 $10,202,585
Trade accounts payable 3,407,210 4,770,009
Accrued liabilities 3,704,153 3,383,259
Bank overdraft - 719,136
Short term obligations under
capital leases 643,728 1,057,014
----------- -----------
Current liabilities 19,141,426 20,132,003
Long term debt 32,120,990 30,290,010
Long term obligations under
capital leases 1,224,444 1,259,022
----------- -----------
Total liabilities 52,486,860 51,681,035
----------- -----------
COMMITMENTS AND CONTINGENCIES - -
MINORITY INTERESTS 11,854,860 13,079,544
PARTNERS' CAPITAL (DEFICIT):
General Partner
Contributed capital 1,000 1,000
Accumulated deficit (272,872) (253,612)
----------- -----------
(271,872) (252,612)
----------- -----------
Limited Partners
Net contributed capital
(56,935 units outstanding
at June 30, 1997 and
December 31, 1996 respectively) 48,817,997 48,817,997
Accumulated deficit (26,733,054) (24,826,298)
----------- -----------
22,084,943 23,991,699
----------- -----------
Currency translation adjustment 1,872,942 2,619,678
----------- -----------
Total partners' capital 23,686,013 26,358,765
----------- -----------
Total liabilities and partners'
capital $88,027,733 $91,119,344
----------- -----------
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
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SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three For the six
months ended months ended
June 30, June 30,
----------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
REVENUES $5,594,962 $5,019,204 $11,135,392 $9,971,811
COSTS AND EXPENSES:
Operating 3,238,478 2,256,075 5,440,033 4,621,737
Selling, general
and administrative 259,658 1,476,645 992,236 3,147,120
Management fees
and allocated
overhead from the
General Partner 1,363,722 1,226,098 3,021,379 2,096,691
Depreciation and
amortization 1,505,503 1,224,440 2,971,661 2,403,228
---------- ---------- ---------- ----------
OPERATING LOSS (772,399) (1,164,054) (1,289,917) (2,296,965)
OTHER INCOME
(EXPENSE):
Interest expense (797,215) (662,471) (1,526,186) (1,324,121)
Interest income 15,598 8,978 38,770 12,417
---------- ---------- ---------- ----------
LOSS BEFORE
MINORITY INTERESTS (1,554,016) (1,817,547) (2,777,333) (3,608,669)
Minority interests 479,310 574,459 851,317 1,145,903
---------- ---------- ---------- ----------
NET LOSS $(1,074,706) $(1,243,088) $(1,926,016) $(2,462,766)
ALLOCATION OF
NET LOSS:
General Partner $(10,747) $(12,431) $(19,260) $(24,628)
Limited Partners $(1,063,959) $(1,230,657) $(1,906,756) $(2,438,138)
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(18.69) $(21.61) $(33.49) $(42.82)
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 56,935 56,935 56,935 56,935
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
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SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months
ended June 30,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,926,016) $(2,462,766)
Adjustments to reconcile net loss
to net cash generated in operating
activities:
Minority interests (851,317) (1,145,903)
Depreciation and amortization 2,971,661 2,403,228
Decrease (increase) in other
receivables 1,129,059 (104,796)
(Increase) decrease in prepaid
expenses and other assets (299,613) 230,496
Increase in accounts payable to
related parties 1,430,296 3,074,480
Increase (decrease) in trade
accounts payable and accrued
liabilities 737,978 (933,140)
----------- -----------
Net cash generated in
operating activities 3,192,048 1,061,599
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction payments for cable
television/telephony system (5,648,561) (2,711,487)
----------- -----------
Net cash used in investing
activities (5,648,561) (2,711,487)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings 2,619,360 2,445,760
Net decrease in bank overdraft (687,955) -
Principal payments under
capital leases (377,975) (408,726)
----------- -----------
Net cash provided by
financing activities 1,553,430 2,037,034
----------- -----------
Effect of currency exchange
rate changes (75,454) 6,904
(Decrease) increase in cash and
cash equivalents (978,537) 394,050
Cash and cash equivalents,
beginning of period 2,200,982 676,731
----------- -----------
Cash and cash equivalents,
end of period $1,222,445 $1,070,781
----------- -----------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $1,147,084 $1,054,184
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
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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,
1996. 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, 1997 and its results of operations and
cash flows for the six month periods ended June 30, 1997 and
1996. 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, 1997, the network consisted of
approximately 570 miles of cable plant, which passed
approximately 86,000 homes. At June 30, 1997 the South Herts
System's cable television customers totalled approximately 21,300
and the South Herts System's residential telephony lines totalled
approximately 25,900. In addition, the South Herts System
provided telephony services to approximately 1,150 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, 1997, 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
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(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.
On December 17, 1996, BCM acquired control of an additional
55.6% of Videotron Holdings Plc ("Videotron"), increasing its
direct and indirect shareholding in that company to 81.8%. On the
same day, a subsidiary of C&W subscribed for additional shares in
BCM, increasing its stake in the company to 32.5%, with BCI's
indirect stake reducing to 32.5%.
On January 8, 1997, BCM made an offer to acquire all the
remaining public and employee shares of Videotron. By April 1,
1997, BCM had increased its stake in Videotron to 100.0%.
On October 22, 1996, C&W, BCI and NYNEX Corporation
("NYNEX") announced that they had entered into an agreement,
pursuant to which, subject to the satisfaction of certain
conditions precedent, the parties agreed to combine: (i) Mercury
Communications Limited ("Mercury"), (ii) BCM (as enlarged by the
acquisition of Videotron), and (iii) NYNEX CableComms Group PLC
and NYNEX Cablecomms Group Inc. (collectively "NYNEX CableComms")
under one company to be called Cable & Wireless Communications
plc ("CWC").
On April 25, 1997, CWC acquired Mercury, and at that date
CWC had received valid acceptances representing approximately
97.9% of the ordinary share capital of BCM and approximately
92.4% of the ordinary share capital of NYNEX CableComms. On May
6,1997, CWC issued notices to those BCM shareholders who had not
already accepted CWC's offer for their shares, and to those NYNEX
CableComms shareholders who had not already accepted CWC's offer
for their shares, informing them that CWC intended to exercise
its rights to acquire compulsorily all outstanding BCM and NYNEX
CableComms shares for which valid acceptances had not yet been
received. At June 16, 1997, CWC had received valid acceptances
representing approximately 99.4% of the ordinary share capital of
BCM and approximately 99.6% of the ordinary share capital of
NYNEX CableComms. Assuming full acceptance of the offers for
shares, CWC will own 100% of BCM. In turn, C&W will own
approximately 52.6%, NYNEX approximately 18.5% and BCI
approximately 14.2% of the fully diluted share capital of CWC,
with the remainder to be held by public shareholders.
CWC, through its subsidiaries and its interest in Bell
Cablemedia South Herts, holds exclusive cable television licenses
and related non-exclusive telecommunications licenses covering
more than six million potential residential customers,
representing approximately 25% of all homes in the United Kingdom
(including 59% of all homes in Greater London), and substantially
all small-to-medium sized business customers within its 45 cable
franchise areas.
(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, 1997
and 1996 were $291,483 and $370,250 respectively. All of these
amounts were expensed on the Unaudited Consolidated Statements of
Operations for the three months ended June 30, 1997 and 1996
respectively.
Consulting fees paid or payable by Bell Cablemedia South Herts
for the six months ended June 30, 1997 and 1996 were $589,032 and
$786,426 respectively. All of these amounts were expensed on the
Unaudited Consolidated Statements of Operations for the six
months ended June 30, 1997 and 1996 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, 1997 and 1996, reimbursements made by
Bell Cablemedia South Herts and the Partnership to the General
Partner or its affiliates for any allocable direct
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and indirect expenses totalled $1,072,238 and $855,848
respectively. During the six months ended June 30, 1997 and 1996,
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 $2,432,347 and
$1,310,265 respectively. These increases were due to an increase
in the provision of services by the General Partner in 1997 as
compared to 1996.
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 June 30,
1997, this interest charge was $114,319, and for the six months
ended June 30, 1997, the interest charge was $217,154. For both
the three month and six month periods ended June 30, 1996, 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, 1997 was $1.64
per United Kingdom pound sterling and the closing exchange rate
at June 30, 1997 was $1.66 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 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"). On
October 18, 1996, (pound)5,000,000 was canceled and the facility
reduced to (pound)20,000,000.
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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)20,000,000. Amounts drawn down
under Facility A bear interest at sterling LIBOR plus a margin of
2.5%. The availability of Facility B of (pound)20,000,000 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,
1997 the average interest rate on this loan was 8.7%.
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)19.3 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 Bell Cablemedia
South Herts has available sufficient resources to fund the
completion of construction and operation of the South Herts
system.
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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, 1997, 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, 1997 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. 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.
On December 17, 1996, BCM acquired control of an additional
55.6% of Videotron Holdings Plc ("Videotron"), increasing its
direct and indirect shareholding in that company to 81.8%. On the
same day, a subsidiary of C&W subscribed for additional shares in
BCM, increasing its stake in the company to 32.5%, with BCI's
indirect stake reducing to 32.5%.
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On January 8, 1997, BCM made an offer to acquire all the
remaining public and employee shares of Videotron. By April 1,
1997, BCM had increased its stake in Videotron to 100.0%.
On October 22, 1996, C&W, BCI and NYNEX Corporation
("NYNEX") announced that they had entered into an agreement,
pursuant to which, subject to the satisfaction of certain
conditions precedent, the parties agreed to combine: (i) Mercury
Communications Limited ("Mercury"), (ii) BCM (as enlarged by the
acquisition of Videotron), and (iii) NYNEX CableComms Group PLC
and NYNEX Cablecomms Group Inc. (collectively "NYNEX CableComms")
under one company to be called Cable & Wireless Communications
plc ("CWC").
On April 25, 1997, CWC acquired Mercury, and at that date
CWC had received valid acceptances representing approximately
97.9% of the ordinary share capital of BCM and approximately
92.4% of the ordinary share capital of NYNEX CableComms. On May
6,1997, CWC issued notices to those BCM shareholders who had not
already accepted CWC's offer for their shares, and to those NYNEX
CableComms shareholders who had not already accepted CWC's offer
for their shares, informing them that CWC intended to exercise
its rights to acquire compulsorily all outstanding BCM and NYNEX
CableComms shares for which valid acceptances had not yet been
received. At June 16, 1997, CWC had received valid acceptances
representing approximately 99.4% of the ordinary share capital of
BCM and approximately 99.6% of the ordinary share capital of
NYNEX CableComms. Assuming full acceptance of the offers for
shares, CWC will own 100% of BCM. In turn, C&W will own
approximately 52.6%, NYNEX approximately 18.5% and BCI
approximately 14.2% of the fully diluted share capital of CWC,
with the remainder to be held by public shareholders.
CWC, through its subsidiaries and its interest in Bell
Cablemedia South Herts, holds exclusive cable television licenses
and related non-exclusive telecommunications licenses covering
more than six million potential residential customers,
representing approximately 25% of all homes in the United Kingdom
(including 59% of all homes in Greater London), and substantially
all small-to-medium sized business customers within its 45 cable
franchise areas.
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, 1997 the Partnership had current liabilities of
approximately $850,000, 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"). On October 18, 1996, (pound)5,000,000
was canceled and the facility reduced to (pound)20,000,000.
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)20,000,000. Amounts drawn down
under Facility A bear interest at sterling LIBOR plus a margin of
2.5%. The availability of Facility B of (pound)20,000,000 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, 1997 the
average interest rate on this loan was 8.7%.
The South Herts Credit Agreement contains various covenants in-
cluding 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 re-
striction on the payment of dividends which provides that dividends or
11
<PAGE>
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)19.3 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 Bell Cablemedia
South Herts has available sufficient resources to fund the
completion of construction and operation of the South Herts
system.
RESULTS OF OPERATIONS
Revenues of the Partnership increased $575,758 for the three
months ended June 30, 1997, over the corresponding period in 1996
from $5,019,204 in 1996 to $5,594,962 in 1997. Revenues of the
Partnership increased $1,163,581 for the six months ended June
30, 1997, over the corresponding period in 1996 from $9,971,811
in 1996 to $11,135,392 in 1997. These increases were the result
of increases in the South Herts System's customer base, offset by
the effect of the implementation of a new residential telephony
tariff, comprising lower line rentals and call charge savings, in
July 1996. The South Herts System served approximately 21,300
basic cable television customers, 25,900 residential telephony
lines and 1,150 business telephony customers at June 30, 1997 as
compared to approximately 19,850 basic cable television
customers, 23,300 residential telephony lines and 850 business
telephony customers at June 30, 1996.
Operating expenses increased $982,403 for the three months
ended June 30, 1997 over the corresponding period in 1996 from
$2,256,075 in 1996 to $3,238,478 in 1997. Operating expenses
increased $818,296 for the six months ended June 30, 1997 over
the corresponding period in 1996 from $4,621,737 in 1996 to
$5,440,033 in 1997. These increases relate to telephony and
programming costs arising from the growth in the South Herts'
customer base. Also costs in the second quarter of 1997 included
increased charges from the major programming supplier backdated
to January 1, 1997, together with an adverse prior period
adjustment for interconnection costs. The prior period costs
brought to account in the three months ended June 30, 1997
amounted to approximately $475,000.
Selling, general and administrative expenses reduced
$1,216,987 for the three months ended June 30, 1997 over the
corresponding period in 1996 from $1,476,645 in 1996 to $259,658
in 1997. Selling, general and administrative expenses reduced
$2,154,884 for the six months ended June 30, 1997 over the
corresponding period in 1996 from $3,147,120 in 1996 to $992,236
in 1997. These reductions were due to reductions in overhead
costs, resulting from the provision of additional services by the
General Partner in 1997 as compared to 1996.
Management fees and allocated overhead from the General
Partner increased by $137,624 for the three months ended June 30,
1997 over the corresponding period in 1996, from $1,226,098 in
1996 to $1,363,722 in 1997. Management fees and allocated
overhead from the General Partner increased by $924,688 for the
six months ended June 30, 1997 over the corresponding period in
1996, from $2,096,691 in 1996 to $3,021,379 in 1997. 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 administative expenses and
management fees and allocated overhead from the General Partner
has declined for both the three and six month periods ended June
30, 1997 compared with the corresponding periods in 1996.
Depreciation and amortization expense increased $281,063 for the
three months ended June 30, 1997, over the corresponding period in
1996, from $1,224,440 in 1996 to $1,505,503 in 1997. Depreciation and
amortization expense increased $568,433 for the six months ended June
30, 1997, over the corresponding period in 1996, from $2,403,228 in
12
<PAGE>
1996 to $2,971,661 in 1997. 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 $134,744 for the three months
ended June 30, 1997 over the corresponding period in 1996, from
$662,471 in 1996 to $797,215 in 1997. Interest expense increased
by $202,065 for the six months ended June 30, 1997 over the
corresponding period in 1996, from $1,324,121 in 1996 to
$1,526,186 in 1997. These increases were generally due to
interest on deferred fees charged by an affiliate of the General
Partner in the three and six month periods ended June 30, 1997.
Interest income increased by $6,620 for the three months ended
June 30, 1997, over the corresponding period in 1996, from $8,978
in 1996 to $15,598 in 1997. Interest income increased by $26,353
for the six months ended June 30, 1997, over the corresponding
period in 1996, from $12,417 in 1996 to $38,770 in 1997. The
increases in interest income were due to higher surplus funds
available for investment in the three and six month periods ended
June 30, 1997 as compared to the corresponding periods in 1996.
Net loss decreased by $168,382 for the three months ended June
30, 1997, over the corresponding period in 1996, from $1,243,088
in 1996 to $1,074,706 in 1997. Net loss decreased by $536,750 for
the six months ended June 30, 1997, over the corresponding period
in 1996, from $2,462,766 in 1996 to $1,926,016 in 1997. The
reductions in net loss were due to the increases in revenue,
combined with reductions in overheads. The effect of these
factors was only partly offset by the increases in depreciation
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
13
<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
BY: ___________________________
Robert Drolet
Director
August 13, 1997.
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> $1,222,445
<SECURITIES> $0
<RECEIVABLES> $4,521,285
<ALLOWANCES> $868,893
<INVENTORY> $0
<CURRENT-ASSETS> $5,501,054
<PP&E> $100,507,954
<DEPRECIATION> $18,641,934
<TOTAL-ASSETS> $88,027,733
<CURRENT-LIABILITIES> $19,141,426
<BONDS> $0
$0
$0
<COMMON> $0
<OTHER-SE> $23,686,013<F1>
<TOTAL-LIABILITY-AND-EQUITY> $88,027,733
<SALES> $5,594,962
<TOTAL-REVENUES> $5,594,962
<CGS> $1,505,503
<TOTAL-COSTS> $1,505,503
<OTHER-EXPENSES> $4,813,891
<LOSS-PROVISION> $47,967
<INTEREST-EXPENSE> $797,215
<INCOME-PRETAX> $(1,074,706)
<INCOME-TAX> $0
<INCOME-CONTINUING> $(1,074,706)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $(1,074,706)
<EPS-PRIMARY> $(18.69)
<EPS-DILUTED> $(18.69)
<FN>
<F1>Comprised of Partners' contributed capital of $48,818,997 less accumulated
losses of $25,132,984
</FN>
</TABLE>
