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Pension And Other Liabilities
12 Months Ended
Dec. 31, 2016
Pension And Other Liabilities [Abstract]  
Pension And Other Liabilities

NOTE 11 – Pension and Other Liabilities

Other liabilities including pension are summarized as follows:









 

 

 

 

 

 

(Dollars in thousands)

 

December 31, 2016

 

December 31, 2015

Current liabilities

 

 

 

 

 

 

Liability for demolition costs(1)

 

$

5,914 

 

$

--

   Lease liability(2)

 

 

5,900 

 

 

5,900 

   Accrued pension(3)

 

 

2,223 

 

 

1,539 

   Security deposit payable

 

 

77 

 

 

180 

   Other

 

 

17 

 

 

21 

   Other current liabilities

 

$

14,131 

 

$

7,640 

Other liabilities

 

 

 

 

 

 

   Straight-line rent liability

 

$

12,413 

 

$

10,823 

   Accrued pension(3)

 

 

5,732 

 

 

6,236 

   Lease make-good provision

 

 

5,146 

 

 

5,228 

   Environmental reserve

 

 

1,656 

 

 

1,656 

   Interest rate swap

 

 

58 

 

 

156 

   Deferred Revenue - Real Estate

 

 

4,398 

 

 

4,596 

   Acquired leases

 

 

267 

 

 

866 

   Other

 

 

495 

 

 

501 

   Other liabilities

 

$

30,165 

 

$

30,062 



(1) Refer to Note 20 – Asset Impairment and Other Losses Recoverable through Insurance Claim 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 is 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”).  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.  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 19Related Party Transactions).  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 $8.0 million and $7.8 million as of December 31, 2016 and 2015, respectively.  The benefits of our pension plans are fully vested and therefore no service costs were recognized 2016 and 2015.  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, 2016

 

December 31, 2015

Benefit obligation at January 1

 

$

7,775 

 

$

7,595 

   Interest cost

 

 

180 

 

 

180 

   Actuarial gain

 

 

--

 

 

--

Benefit obligation at December 31

 

$

7,955 

 

$

7,775 

Funded status at December 31

 

$

(7,955)

 

$

(7,775)



Amounts recognized in the balance sheet consists of:





 

 

 

 

 

 

(Dollars in thousands)

 

December 31, 2016

 

December 31, 2015

Current liabilities

 

$

2,223 

 

$

1,539 

Other liabilities - Non current

 

 

5,732 

 

 

6,236 

Total pension liability

 

$

7,955 

 

$

7,775 



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





 

 

 

 

 

 

(Dollars in thousands)

 

December 31, 2016

 

December 31, 2015

Net periodic benefit cost

 

 

 

 

 

 

Interest cost

 

$

180 

 

$

180 

Amortization of prior service costs

 

 

--

 

 

--

Amortization of net actuarial gain

 

 

129 

 

 

207 

Net periodic benefit cost

 

$

309 

 

$

387 

Items recognized in other comprehensive income

 

 

 

 

 

 

Net loss

 

$

--

 

$

--

Amortization of prior service cost

 

 

--

 

 

--

Amortization of net loss

 

 

(129)

 

 

(207)

Total recognized in other comprehensive income

 

$

(129)

 

$

(207)

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:



 

 

 

 

 

 

(Dollars in thousands)

 

December 31, 2016

 

December 31, 2015

Unamortized actuarial loss

 

$

2,719 

 

$

2,848 

Accumulated other comprehensive loss

 

$

2,719 

 

$

2,848 



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, 2016:



 

 

 

(Dollars in thousands)

 

Estimated Future Pension Payments

2017

 

$

2,223 

2018

 

 

684 

2019

 

 

684 

2020

 

 

684 

2021

 

 

684 

Thereafter

 

 

2,996 

Total pension payments

 

$

7,955 

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, 2016

 

As of and for the year ended December 31, 2015

Lease make-good provision, at January 1

 

$

5,228 

 

$

4,385 

Liabilities incurred during the year

 

 

35 

 

 

1,314 

Liabilities settled during the year

 

 

(365)

 

 

(381)

Accretion expense

 

 

262 

 

 

212 

Effect of changes in foreign currency

 

 

(14)

 

 

(302)

Lease make-good provision, at December 31

 

$

5,146 

 

$

5,228