NOTE 11 – PENSION AND OTHER LIABILITIES

Other liabilities including pension are summarized as follows:



	December 31,
(Dollars in thousands)	2019		2018
Current liabilities
Liability for demolition and remediation costs(1)	$	2,745	$	2,630
Lease liability(2)		—		5,900
Accrued pension(3)		684		684
Security deposit payable		114		84
Finance lease liabilities		93		—
Other		17		7
Other current liabilities	$	3,653	$	9,305
Other liabilities
Straight-line rent liability	$	—	$	16,362
Accrued pension(3)		4,469		4,670
Lease make-good provision		6,667		5,614
Environmental reserve		1,656		1,656
Lease liability(2)		5,900		—
Deferred Revenue - Real Estate		—		32
Acquired leases		37		91
Finance lease liabilities		116		—
Other		9		506
Other non-current liabilities	$	18,854	$	28,931

(1)

Refer to Note 21 – 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. 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 $0.0 million presented under other liabilities which accreted up to the $5.9 million liability through July 1, 2013 (see Note 2 – Related Parties). On August 28, 2019, we exercised our option to acquire the ground lessee’s interest in the 13-year ground lease underlying and the real property assets constituting our Village East Cinema in Manhattan. The purchase price under the option is $5.9 million, being the lease liability of $5.9 million presented under other liabilities. It is anticipated that the transaction will close on or about May 31, 2021.

On March 12, 2020, we amended the original agreement to (i) extend the term of the lease to January 31, 2022 and extend the put option to December 4, 2021 and (ii) at SHC’s request, in connection with our deferral of the closing date for our acquisition of SHC’s interest in the Village East Cinema, the Company reinstated and extended until December 4, 2021 SHC’s right to put that interest to us. That put right had previously expired on December 4, 2019. We are advised by SHC that it wanted this reinstatement and extension in order to assure itself that, in the event of the non-performance by us of our current contractual obligation to close our purchase of the interest in the ground lease on or about the extended date of May 31, 2021, that it could (as, in effect, an additional remedy) exercise this reinstated and extended put right. We believe that the reinstatement and extension of this put right is immaterial to our Company, since we have in fact already exercised our option, are in fact under contract with SHC to acquire SHC’s interest in the Village East Cinema and have every intention of completing that acquisition.

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 $57,000 payable to the estate of Mr. James J. Cotter, Sr. 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.

In February 2018, we made a payment of $2.4 million relating to the annuity representing payments for the 42 months outstanding at the time. Monthly ongoing payments of $57,000 are now being made.

As a result of the above, included in our other current and non-current liabilities are accrued pension costs of $5.2 million and $5.4 million as of December 31, 2019 and 2018, respectively. The benefits of our pension plans are fully vested and therefore no service costs were recognized 2019 and 2018. 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)	2019		2018
Benefit obligation at January 1	$	5,354	$	8,135
Service cost
Interest cost		482		180
Payments made		(683)		(2,961)
Benefit obligation at December 31	$	5,153	$	5,354
Funded status at December 31	$	(5,153)	$	(5,354)

Amounts recognized in the balance sheet consists of:



	December 31,
(Dollars in thousands)	2019		2018
Current liabilities	$	684	$	684
Other liabilities - Non current		4,469		4,670
Total pension liability	$	5,153	$	5,354

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



	December 31,
(Dollars in thousands)	2019		2018
Net periodic benefit cost
Interest cost	$	483	$	180
Amortization of prior service costs		—		—
Amortization of net actuarial gain		151		154
Net periodic benefit cost	$	634	$	334
Items recognized in other comprehensive income
Net loss	$	—	$	—
Amortization of net loss		(151)		(154)
Total recognized in other comprehensive income	$	(151)	$	(154)
Total recognized in net periodic benefit cost and other comprehensive income	$	483	$	180

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



	December 31,
(Dollars in thousands)	2019		2018
Unamortized actuarial loss	$	2,287	$	2,438
Accumulated other comprehensive income	$	2,287	$	2,438

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, 2019:



(Dollars in thousands)	Estimated Future Pension Payments
2020	$	684
2021		684
2022		684
2023		684
2024		684
Thereafter		1,733
Total pension payments	$	5,153

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, 2019		As of and for the year ended December 31, 2018
Lease make-good provision, at January 1	$	5,614	$	5,648
Liabilities incurred during the year		902		—
Liabilities settled during the year		(206)		—
Accretion expense		352		292
Effect of changes in foreign currency		5		(326)
Lease make-good provision, at December 31	$	6,667	$	5,614