NOTE 11 – PENSION AND OTHER LIABILITIES

Other liabilities including pension are summarized as follows:



	December 31,
(Dollars in thousands)	2018		2017
Current liabilities
Liability for demolition and remediation costs(1)	$	2,630	$	2,781
Lease liability(2)		5,900		5,900
Accrued pension(3)		684		2,907
Security deposit payable		84		91
Other		7		—
Other current liabilities	$	9,305	$	11,679
Other liabilities
Straight-line rent liability	$	16,362	$	13,444
Accrued pension(3)		4,670		5,228
Lease make-good provision		5,614		5,648
Environmental reserve		1,656		1,656
Deferred Revenue - Real Estate		32		18
Acquired leases		91		186
Other		506		469
Other liabilities	$	28,931	$	26,649

(1)

Refer to Note 20 – Insurance Recoveries on Impairment and Related Losses due to Earthquake for details on the estimation of the demolition costs for our Courtenay Central parking structure.

(2)

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

(3)

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

Lease Liability - Village East Purchase Option

Our Village East lease includes a call option pursuant to which we may purchase the cinema ground lease for $5.9 million at the end of the lease term in June 2020. Additionally, our lease has a put option pursuant to which SHC may require our Company 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 through July 1, 2013 (see Note 19 – Related Parties). As the put option has been exercisable by SHC since 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 $10.2 million discounted at 4.25% over a 15-year term, resulting in a monthly payment of $56,944 payable to the estate of Mr. James J. 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 $2.7 million (which is the difference between the estimated payout of $10.2 million and the present value of $7.5 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 $5.4 million and $8.1 million as of December 31, 2018 and 2017, respectively. The benefits of our pension plans are fully vested and therefore no service costs were recognized 2018 and 2017. Our pension plans are unfunded.

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



	December 31,
(Dollars in thousands)	2018		2017
Benefit obligation at January 1	$	8,135	$	7,955
Interest cost		180		180
Payments made		(2,961)		—
Actuarial gain		—		—
Benefit obligation at December 31	$	5,354	$	8,135
Funded status at December 31	$	(5,354)	$	(8,135)

Amounts recognized in the balance sheet consists of:



	December 31,
(Dollars in thousands)	2018		2017
Current liabilities	$	684	$	2,907
Other liabilities - Non current		4,670		5,228
Total pension liability	$	5,354	$	8,135

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



	December 31,
(Dollars in thousands)	2018		2017
Net periodic benefit cost
Interest cost	$	180	$	180
Amortization of prior service costs		—		—
Amortization of net actuarial gain		154		127
Net periodic benefit cost	$	334	$	307
Items recognized in other comprehensive income
Amortization of net loss		(154)		(127)
Total recognized in other comprehensive income	$	(154)	$	(127)
Total recognized in net periodic benefit cost and other comprehensive income	$	180	$	180

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



	December 31,
(Dollars in thousands)	2018		2017
Unamortized actuarial loss	$	2,438	$	2,592
Accumulated other comprehensive loss	$	2,438	$	2,592

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 (gross of any tax effects).

The following table presents estimated future benefit payments for the next five years and thereafter as of December 31, 2018:



(Dollars in thousands)	Estimated Future Pension Payments
2019	$	684
2020		684
2021		684
2022		684
2023		684
Thereafter		1,934
Total pension payments	$	5,354

Lease Make-Good Provision

We recognize obligations for future leasehold restoration costs relating to properties that we use mostly on our cinema operations under operating lease arrangements. 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 following table:



(Dollars in thousands)	As of and for the year ended December 31, 2018		As of and for the year ended December 31, 2017
Lease make-good provision, at January 1	$	5,648	$	5,146
Liabilities incurred during the year		—		—
Liabilities settled during the year		—		—
Accretion expense		292		282
Effect of changes in foreign currency		(326)		220
Lease make-good provision, at December 31	$	5,614	$	5,648