NOTE 11 – Pension and Other Liabilities

Other liabilities including pension are summarized as follows:


(Dollars in thousands)	December 31, 2015		December 31, 2014
Current liabilities
Lease liability(1)	$	5,900	$	5,900
Accrued pension(2)		1,539		855
Security deposit payable		180		202
Other		21		12
Other current liabilities	$	7,640	$	6,969
Other liabilities
Straight-line rent liability	$	10,823	$	9,246
Accrued pension(2)		6,236		6,740
Lease make-good provision		5,228		4,385
Environmental reserve		1,656		1,656
Interest rate swap		156		2,177
Deferred Revenue - Real Estate		4,596		5,083
Acquired leases		866		1,265
Other		501		3,009
Other liabilities	$	30,062	$	33,561

(1) Represents the lease liability of the option associated with the ground lease purchase of the Village East Cinema. See below for more information.

(2) Represents the pension liability associated with the Supplemental Executive Retirement Plan explained below.

Lease Liability - Village East Purchase Option

On June 29, 2010, we agreed to extend our existing lease from SHC of the Village East Cinema in New York City by 10 years, with a new termination date of June 30, 2020. The Village East lease includes a sub-lease of the ground underlying the cinema that is subject to a longer-term ground lease between SHC and an unrelated third party that expires June 1, 2031 (the “cinema ground lease”). The extended lease provides for a call option pursuant to which Reading may purchase the cinema ground lease for $5.9 million at the end of the lease term. Additionally, the lease has a put option pursuant to which SHC may require Reading to purchase all or a portion of SHC’s interest in the existing cinema lease and the cinema ground lease at any time between July 1, 2013 and December 4, 2019. SHC’s put option may be exercised on one or more occasions in increments of not less than $100,000 each. Because our late Chairman, Chief Executive Officer, and controlling shareholder, Mr. James J. Cotter, Sr. was also the managing member of SHC, RDI and SHC are considered entities under common control. As a result, we have recorded the Village East Cinema building as a property asset of $4.7 million on our balance sheet based on the cost carry-over basis from an entity under common control with a corresponding lease liability of $5.9 million presented under other liabilities which accreted up to the $5.9 million liability till July 1, 2013 (see Note 18 – Related Parties and Transactions). As the option is able to be exercised by SHC starting on July 1, 2013, the lease liability has been classified as part of other current liabilities.

Pension Liability - Supplemental Executive Retirement Plan

On August 29, 2014, the Supplemental Executive Retirement Plan (“SERP”) that was effective since March 1, 2007, was ended and replaced with a new pension annuity. As a result of the termination of the SERP program, the accrued pension liability of $7.6 million was reversed and replaced with a new pension annuity liability of $7.5 million. The valuation of the liability is based on the present value of $10.3 million discounted at 4.25% over a 15-year term, resulting in a monthly payment of $56,944 payable to the estate of Mr. Jim Cotter Sr. The discount rate of 4.25% has been applied since 2014 to determine the net periodic benefit cost and plan benefit obligation and is expected to be used in future years. The discounted value of $2.5 million (which is the difference between the estimated payout of $10.3 million and the present value of $7.8 million) will be amortized and expensed based on the 15-year term. In addition, the accumulated actuarial loss of $3.1 million recorded, as part of other comprehensive income, will also be amortized based on the 15-year term.

As a result of the above, included in our other current and non-current liabilities are accrued pension costs of $7.8 million and $7.6 million as of December 31, 2015 and 2014, respectively. The benefits of our pension plans are fully vested and therefore no service costs were recognized 2015 and 2014. Our pension plans are unfunded.

The change in the SERP pension benefit obligation and the funded status are as follows:


(Dollars in thousands)	December 31, 2015		December 31, 2014
Benefit obligation at January 1	$	7,595	$	7,398
Interest cost		180		255
Actuarial gain		--		(58)
Benefit obligation at December 31	$	7,775	$	7,595
Funded status at December 31	$	(7,775)	$	(7,595)

Amounts recognized in the balance sheet consists of:


(Dollars in thousands)	December 31, 2015		December 31, 2014
Current liabilities	$	1,539	$	855
Other liabilities - Non current		6,236		6,740
	$	7,775	$	7,595

The components of the net periodic benefit cost and other amounts recognized in other comprehensive income are as follows:


(Dollars in thousands)	December 31, 2015		December 31, 2014
Net periodic benefit cost
Interest cost	$	180	$	209
Amortization of prior service costs		--		254
Amortization of net actuarial gain		207		426
Net periodic benefit cost	$	387	$	889
Items recognized in other comprehensive income
Net loss	$	--	$	(58)
Amortization of prior service cost		--		(254)
Amortization of net loss		(207)		(426)
Total recognized in other comprehensive income	$	(207)	$	(738)

Total recognized in net periodic benefit cost and other comprehensive income	$	180	$	151

Items not yet recognized as a component of net periodic pension cost consist of the following:


(Dollars in thousands)	December 31, 2015		December 31, 2014
Unamortized actuarial loss	$	2,848	$	3,055
Accumulated other comprehensive loss	$	2,848	$	3,055

The estimated unamortized actuarial loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year will be $207,000.

The following table presents estimated future benefit payments for the next five years and thereafter as of December 31, 2015:


(Dollars in thousands)	Estimated Future Pension Payments
2016	$	1,539
2017		684
2018		684
2019		684
2020		684
Thereafter		3,500
Total pension payments	$	7,775

Lease Make-Good Provision

The Company recognizes obligations for future make-good costs relating to its leased premises. Each lease is unique to the negotiated conditions with the lessor, but in general most leases require for the removal of cinema-related assets and improvements. There are no assets specifically restricted to settle this obligation.

A reconciliation of the beginning and ending carrying amounts of the lease make-good provision is presented in the table:


(Dollars in thousands)	As of and for the year ended December 31, 2015		As of and for the year ended December 31, 2014
Opening balance	$	4,385	$	-
Liabilities incurred during the year		1,314		4,385
Liabilities settled during the year		(381)		-
Accretion expense		212		-
Effect of changes in foreign currency		(302)		-
Ending balance	$	5,228	$	4,385