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, 1998.
[ ] 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.#
26 Red Lion Square, London, WC1R 4HQ, England
---------------------------------------------
Address of principal executive office
011 44 171 528 2000
-------------------
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
March 31, December 31,
1998 1997
----------- -----------
ASSETS:
CASH AND CASH EQUIVALENTS $ 442,094 $ 434,386
PREPAID EXPENSES -- 19,919
----------- -----------
CURRENT ASSETS 442,094 454,305
INVESTMENT IN CABLE TELEVISION
AND TELECOMMUNICATIONS PROPERTIES,
net of accumulated depreciation
and amortization of $30,133,755
and $28,220,589 at March 31, 1998
and December 31, 1997, respectively 75,837,188 75,924,942
OTHER ASSETS 569,364 584,096
----------- -----------
Total assets $76,848,646 $76,963,343
----------- -----------
The accompanying notes to unaudited financial statements
are an integral part of these unaudited consolidated
balance sheets.
2
<PAGE>
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1998 1997
----------- -----------
LIABILITIES:
Accounts payable to affiliates
and related parties $ 17,742,779 $ 18,335,570
Accrued liabilities 138,471 134,018
Short term obligations under
capital leases 753,570 888,516
------------ ------------
Current liabilities 18,634,820 19,358,104
Long term debt 32,319,780 31,756,220
Long term obligations under
capital leases 252,865 322,498
------------ ------------
Total liabilities 51,207,465 51,436,822
------------ ------------
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTERESTS 8,657,592 8,588,899
PARTNERS' CAPITAL (DEFICIT):
General Partner
Contributed capital 1,000 1,000
Accumulated deficit (340,078) (337,517)
------------ ------------
(339,078) (336,517)
------------ ------------
Limited Partners
Net contributed capital
(56,935 units outstanding at
March 31, 1998 and December 31,
1997 respectively) 48,817,997 48,817,997
Accumulated deficit (33,386,497) (33,132,920)
------------ ------------
15,431,500 15,685,077
------------ ------------
Currency translation adjustment 1,891,167 1,589,062
------------ ------------
Total partners' capital 16,983,589 16,937,622
------------ ------------
Total liabilities and partners'
capital $ 76,848,646 $ 76,963,343
------------ ------------
The accompanying notes to unaudited financial statements
are an integral part of these unaudited consolidated
balance sheets.
3
<PAGE>
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months
ended March 31,
1998 1997
----------- -----------
REVENUES $ 6,791,406 $ 5,540,430
COSTS AND EXPENSES:
Operating (2,992,962) (2,201,555)
Selling, general and
administrative (59,303) (732,578)
Management fees and allocated
overhead from the General Partner (1,890,397) (1,657,657)
Depreciation and amortization (1,390,885) (1,466,158)
----------- -----------
OPERATING INCOME (LOSS) 457,859 (517,518)
OTHER INCOME (EXPENSE):
Interest expense (835,890) (728,971)
Interest income 39,533 23,172
----------- -----------
LOSS BEFORE MINORITY INTERESTS (338,498) (1,223,317)
Minority interests 82,360 372,007
----------- -----------
NET LOSS $ (256,138) $ (851,310)
ALLOCATION OF NET LOSS:
General Partner $ (2,561) $ (8,513)
Limited Partners $ (253,577) $ (842,797)
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (4.45) $ (14.80)
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 56,935 56,935
The accompanying notes to unaudited financial statements
are an integral part of these unaudited consolidated
financial statements.
4
<PAGE>
SOUTH HERTFORDSHIRE UNITED KINGDOM FUND, LTD.
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months
ended March 31,
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (256,138) $ (851,310)
Adjustments to reconcile net loss
to net cash generated by operating
activities:
Minority interests (82,360) (372,007)
Depreciation and amortization 1,390,885 1,466,157
Change in operating assets and
liabilities
Decrease in other receivables -- 1,656,440
Decrease (increase) in prepaid
expenses and other assets 44,608 (182,837)
(Decrease) increase in accounts
payable to related parties (887,311) 1,972,585
Increase in trade accounts
payable and accrued liabilities 4,453 7,593
----------- -----------
Net cash generated by
operating activities 214,137 3,696,621
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction payments for cable
television/telephony system 8,236 (3,790,743)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings -- 2,619,040
Net decrease in bank overdraft -- (687,871)
Principal payments under capital
leases (222,373) (196,078)
----------- -----------
Net cash (used in) provided
by financing activities (222,373) 1,735,091
----------- -----------
Effect of currency exchange rate
changes 7,708 (84,017)
Increase in cash and cash equivalents 7,708 1,556,952
Cash and cash equivalents, beginning
of period $ 434,386 $ 2,200,982
----------- -----------
Cash and cash equivalents, end of
period $ 442,094 $ 3,757,934
----------- -----------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 763,189 $ 549,385
The accompanying notes to unaudited financial statements
are an integral part of these unaudited consolidated
financial 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,
1997. 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, 1998 and its results of operations and
cash flows for the three month periods ended March 31, 1998 and
1997. 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, 1998, the network consisted of
approximately 570 miles of cable plant, and included
approximately 87,300 homes released to operations. At March 31,
1998 the South Herts System's cable television customers totalled
approximately 22,700 and the South Herts System's residential
telephony lines totalled approximately 27,900.
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, 1998, 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
6
<PAGE>
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").
C&W, NYNEX and BCI presently own, directly or indirectly,
approximately 53%, 19% and 14% respectively, of the issued share
capital of CWC. Public shareholders hold the remaining 14%.
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 47 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 March 31, 1998
and 1997 were $362,555 and $297,549 respectively. All of these
amounts were expensed on the Unaudited Consolidated Statements of
Operations for the three months ended March 31, 1998 and 1997,
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, 1998 and 1997, 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 $1,527,842 and $1,360,108 respectively. These increases
were due to an increase in the provision of services by the
General Partner in 1998 as compared to 1997.
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,
1998 and 1997, these interest charges were $72,701 and $66,350
respectively.
7
<PAGE>
(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 partners'
capital. In the discretion of the General Partner, net proceeds
from the sale of Partnership interests will be 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, 1998 was
$1.65 per United Kingdom pound sterling and the exchange rate at
March 31, 1998 was $1.67 per United Kingdom pound sterling.
Property, Plant and Equipment
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 10-40 years for the cable network and other
electronic equipment, 40 years for freehold property and 3-10
years for office and other equipment. Depreciation of the
capitalized construction costs begins from the time of receiving
first revenues from subscribers.
(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 cancelled and the facility
reduced to (pound)20,000,000.
The credit facility was structured as a revolving facility
through December 31, 1997, at which time the facility was
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.
The South Herts Credit Agreement contains various covenants
including financial covenants such as a cumulative revenue test,
bank debt ratio, interest cover ratio, a fixed charges ratio and
a pro-forma debt service ratio and other covenants such as
restrictions on disposals and on the creation of indebtedness and
encumbrances. The 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 could not
be made prior to
8
<PAGE>
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.
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. The amount
outstanding under the facility at March 31, 1998 was
(pound)19,300,000 and this amount was all drawn under facility B.
9
<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 March 31, 1998, 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, 1998 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%.
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%.
10
<PAGE>
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").
C&W, NYNEX and BCI presently own, directly or indirectly,
approximately 53%, 19% and 14% respectively, of the issued share
capital of CWC. Public shareholders hold the remaining 14%.
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 47 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 March 31, 1998 the Partnership had current liabilities of
approximately $900,000, 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 cancelled 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.
The South Herts Credit Agreement contains various covenants
including financial covenants such as a cumulative revenue test,
bank debt ratio, interest cover ratio, a fixed charges ratio and
a pro-forma debt service ratio and other covenants such as
restrictions on disposals and on the creation of indebtedness and
encumbrances. The 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)
11
<PAGE>
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. 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 $1,250,976 for the three
months ended March 31, 1998, over the corresponding period in
1997 from $5,540,430 in 1997 to $6,791,406 in 1998.. These
increases were the result of increases in the South Herts
System's customer base. The South Herts System served
approximately 22,700 basic cable television customers and 27,900
residential telephony lines at March 31, 1998 as compared to
approximately 21,000 basic cable television customers and 24,600
residential telephony lines at March 31, 1997.
Operating expenses increased $791,407 for the three months
ended March 31, 1998 over the corresponding period in 1997 from
$2,201,555 in 1997 to $2,992,962 in 1998. These increases relate
to telephony and programming costs arising from the growth in the
South Herts' customer base.
Selling, general and administrative expenses reduced $673,275
for the three months ended March 31, 1998 over the corresponding
period in 1997 from $732,578 in 1997 to $59,303 in 1998. These
reductions were due to reductions in overhead costs, resulting
from the provision of additional services by the General Partner
in 1998 as compared to 1997.
Management fees and allocated overhead from the General
Partner increased by $232,740 for the three months ended March
31, 1998 over the corresponding period in 1997, from $1,657,657
in 1997 to $1,890,397 in 1998. 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 CWC Group. Overall, the aggregate of selling, general
and administative expenses and management fees and allocated
overhead from the General Partner has declined for the three
months ended March 31, 1998 compared with the corresponding
period in 1997.
Depreciation and amortization expense decreased $75,273 for
the three months ended March 31, 1998, over the corresponding
period in 1997, from $1,466,158 in 1997 to $1,390,885 in 1998.
These decreases were mainly due to the writedown of fixed assets
of approximately $6.6 million in the final quarter of 1997.
Interest expense increased by $106,919 for the three months
ended March 31, 1998 over the corresponding period in 1997, from
$728,971 in 1997 to $835,890 in 1998. These increases were
generally due to interest on deferred fees charged by an
affiliate of the General Partner in the three month period ended
March 31, 1998 and higher levels of average debt in the three
month period ended March 31,1998 as compared to the corresponding
period in 1997.
Interest income increased by $16,361 for the three months
ended March 31,1998, over the corresponding period in 1997, from
$23,172 in 1997 to $39,533 in 1998. The increases in interest
income were due to higher surplus funds available for investment
in the three month period ended March 31,1998 as compared to the
corresponding period in 1997.
Net loss decreased by $595,172 for the three months ended
March 31, 1998, over the corresponding period in 1997, from
$851,310 in 1997 to $256,138 in 1998. The reduction in net loss
was due to the increases in revenue, combined with reductions in
overheads. The effect of these factors was only partly offset by
the increase in interest expense.
12
<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
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/ Robert Drolet
---------------------------
Robert Drolet
Director
May 15, 1998.
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> $442,094
<SECURITIES> $0
<RECEIVABLES> $0
<ALLOWANCES> $0
<INVENTORY> $0
<CURRENT-ASSETS> $442,094
<PP&E> $105,970,943
<DEPRECIATION> $30,133,755
<TOTAL-ASSETS> $76,848,646
<CURRENT-LIABILITIES> $18,634,820
<BONDS> $0
$0
$0
<COMMON> $0
<OTHER-SE> $16,983,589<F1>
<TOTAL-LIABILITY-AND-EQUITY> $76,848,646
<SALES> $6,791,406
<TOTAL-REVENUES> $6,791,406
<CGS> $1,390,885
<TOTAL-COSTS> $1,390,885
<OTHER-EXPENSES> $4,942,662
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $835,890
<INCOME-PRETAX> $(256,138)
<INCOME-TAX> $0
<INCOME-CONTINUING> $(256,138)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $(256,138)
<EPS-PRIMARY> $(4.45)
<EPS-DILUTED> $(4.45)
<FN>
<F1>Comprised of Partners' contributed capital of $48,818,997 less accumulated
losses of $31,835,408
</FN>
</TABLE>
