ALEXANDERS INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Number Report of Independent Registered Public Accounting Firm 40 Consolidated Balance Sheets as of December 31, 2020 and 2019 42 Consolidated Statements of Income for the Years Ended December 31, 2020, 2019 and 2018 43 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018 44 Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018 45 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018 46 Notes to Consolidated Financial Statements 47 39 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alexander’s, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Alexander’s, Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 16, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Real Estate - Refer to Note 3 to the financial statements Critical Audit Matter Description The Company’s real estate assets are individually evaluated for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. The Company’s evaluation of the recoverability of real estate assets involves the comparison of undiscounted future cash flows expected to be generated by each real estate asset over the Company’s estimated holding period to the respective carrying amount. The Company’s undiscounted future cash flow analyses require management to make significant estimates, including estimated terminal values determined using appropriate capitalization rates. 40 Given the Company’s estimated capitalization rates used in the evaluation of impairment of real estate assets is a significant assumption made by management, performing audit procedures to evaluate the reasonableness of management’s undiscounted future cash flow analyses required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s estimated capitalization rates used in the evaluation of impairment of real estate assets included the following, among others: • We tested the effectiveness of controls over management’s evaluation of the recoverability of real estate, including controls over management’s determination of the reasonableness of the applicable capitalization rates. • Inquired with management regarding their determination of the capitalization rates, including considerations related to the impact of COVID-19 and evaluating the consistency of the capitalization rates used with evidence obtained in other areas of the audit. • With the assistance of our fair value specialists, we evaluated the reasonableness of the Company’s estimated capitalization rates by: ◦ Testing the source information underlying the determination of the capitalization rates by evaluating the reasonableness of the capitalization rates used by management with independent market data, focusing on key factors, including the impact of COVID-19, geographical location, tenant composition, and property type. ◦ Developing a range of independent estimates of capitalization rates and comparing those to the capitalization rates utilized by management. /s/ DELOITTE & TOUCHE LLP New York, New York February 16, 2021 We have served as the Company’s auditor since 1969. 41 ALEXANDER’S, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per share amounts) December 31, ASSETS 2020 2019 Real estate, at cost: Land $ 44,971 $ 44,971 Buildings and leasehold improvements 1,014,311 984,053 Development and construction in progress 11,761 12,318 Total 1,071,043 1,041,342 Accumulated depreciation and amortization ( 350,122 ) ( 324,499 ) Real estate, net 720,921 716,843 Cash and cash equivalents 428,710 298,063 Restricted cash 21,167 15,914 Marketable securities 6,024 14,409 Tenant and other receivables 8,116 6,092 Receivable arising from the straight-lining of rents 145,274 166,376 Deferred lease costs, net, including unamortized leasing fees to Vornado of $ 27,851 and $ 32,374 , respectively 36,524 41,123 Other assets 37,402 6,691 $ 1,404,138 $ 1,265,511 LIABILITIES AND EQUITY Mortgages payable, net of deferred debt issuance costs $ 1,156,170 $ 970,961 Amounts due to Vornado 1,516 1,426 Accounts payable and accrued expenses 35,342 31,756 Other liabilities 7,882 7,853 Total liabilities 1,200,910 1,011,996 Commitments and contingencies Preferred stock: $ 1.00 par value per share; authorized, 3,000,000 shares; issued and outstanding, none — — Common stock: $ 1.00 par value per share; authorized, 10,000,000 shares; issued, 5,173,450 shares; outstanding, 5,107,290 shares 5,173 5,173 Additional capital 32,965 32,365 Retained earnings 166,165 216,394 Accumulated other comprehensive loss ( 707 ) ( 49 ) 203,596 253,883 Treasury stock: 66,160 shares, at cost ( 368 ) ( 368 ) Total equity 203,228 253,515 $ 1,404,138 $ 1,265,511 See notes to consolidated financial statements. 42 ALEXANDER’S, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except share and per share amounts) Year Ended December 31, 2020 2019 2018 REVENUES Rental revenues $ 199,142 $ 226,350 $ 232,825 EXPENSES Operating, including fees to Vornado of $ 5,429 , $ 5,386 and $ 4,700 , respectively ( 88,403 ) ( 89,738 ) ( 93,775 ) Depreciation and amortization ( 32,357 ) ( 31,351 ) ( 33,089 ) General and administrative, including management fees to Vornado of $ 2,380 in each year ( 6,307 ) ( 5,772 ) ( 5,343 ) Total expenses ( 127,067 ) ( 126,861 ) ( 132,207 ) Interest and other income, net 2,667 8,244 12,546 Interest and debt expense ( 24,204 ) ( 38,901 ) ( 44,533 ) Change in fair value of marketable securities (see Note 6) ( 8,599 ) ( 8,757 ) ( 11,990 ) Income from continuing operations 41,939 60,075 56,641 Loss from discontinued operations (see Note 7) — — ( 23,797 ) Net income $ 41,939 $ 60,075 $ 32,844 Income per common share - basic and diluted: Income from continuing operations $ 8.19 $ 11.74 $ 11.07 Loss from discontinued operations (see Note 7) — — ( 4.65 ) Net income per common share $ 8.19 $ 11.74 $ 6.42 Weighted average shares outstanding - basic and diluted 5,120,922 5,118,198 5,116,838 See notes to consolidated financial statements. 43 ALEXANDER’S, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in thousands) Year Ended December 31, 2020 2019 2018 Net income $ 41,939 $ 60,075 $ 32,844 Other comprehensive (loss) income: Change in fair value of interest rate derivatives ( 658 ) 78 ( 1 ) Comprehensive income $ 41,281 $ 60,153 $ 32,843 See notes to consolidated financial statements. 44 ALEXANDER’S, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Amounts in thousands) Accumulated Other Comprehensive Income (Loss) Common Stock Additional Capital Retained Earnings Treasury Stock Total Equity Shares Amount Balance, December 31, 2017 5,173 $ 5,173 $ 31,577 $ 302,543 $ 5,030 $ ( 368 ) $ 343,955 Net income — — — 32,844 — — 32,844 Dividends paid ($ 18.00 per common share) — — — ( 92,100 ) — — ( 92,100 ) Cumulative effect of change in accounting principle — — — 5,156 ( 5,156 ) — — Change in fair value of interest rate derivatives — — — — ( 1 ) — ( 1 ) Deferred stock unit grants — — 394 — — — 394 Balance, December 31, 2018 5,173 5,173 31,971 248,443 ( 127 ) ( 368 ) 285,092 Net income — — — 60,075 — — 60,075 Dividends paid ($ 18.00 per common share) — — — ( 92,124 ) — — ( 92,124 ) Change in fair value of interest rate derivatives — — — — 78 — 78 Deferred stock unit grants — — 394 — — — 394 Balance, December 31, 2019 5,173 5,173 32,365 216,394 ( 49 ) ( 368 ) 253,515 Net income — — — 41,939 — — 41,939 Dividends paid ($ 18.00 per common share) — — — ( 92,168 ) — — ( 92,168 ) Change in fair value of interest rate derivatives — — — — ( 658 ) — ( 658 ) Deferred stock unit grants — — 600 — — — 600 Balance, December 31, 2020 5,173 $ 5,173 $ 32,965 $ 166,165 $ ( 707 ) $ ( 368 ) $ 203,228 See notes to consolidated financial statements. 45 ALEXANDER’S, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Year Ended December 31, 2020 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 41,939 $ 60,075 $ 32,844 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, including amortization of debt issuance costs 35,121 36,515 38,499 Straight-lining of rents 21,102 2,413 5,924 Write-off of tenant receivables 4,122 — — Stock-based compensation expense 600 394 394 Change in fair value of marketable securities 8,599 8,757 11,990 Dividends received in stock ( 214 ) — — Change in operating assets and liabilities: Tenant and other receivables, net ( 6,146 ) ( 2,017 ) ( 1,382 ) Other assets ( 28,378 ) 21,553 ( 1,197 ) Amounts due to Vornado ( 402 ) 789 ( 1,907 ) Accounts payable and accrued expenses 2,361 ( 1,800 ) ( 11,760 ) Other liabilities ( 638 ) ( 609 ) 133 Net cash provided by operating activities 78,066 126,070 73,538 CASH FLOWS FROM INVESTING ACTIVITIES Construction in progress, real estate additions and other ( 32,460 ) ( 9,449 ) ( 3,966 ) Repayment of Rego Park II loan participation — — 2,829 Net cash used in investing activities ( 32,460 ) ( 9,449 ) ( 1,137 ) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid ( 92,168 ) ( 92,124 ) ( 92,100 ) Debt issuance costs ( 7,246 ) ( 15 ) ( 2,189 ) Debt repayments ( 50,000 ) — ( 160,142 ) Proceeds from borrowings 239,708 — 78,246 Net cash provided by (used in) financing activities 90,294 ( 92,139 ) ( 176,185 ) Net increase (decrease) in cash and cash equivalents and restricted cash 135,900 24,482 ( 103,784 ) Cash and cash equivalents and restricted cash at beginning of year 313,977 289,495 393,279 Cash and cash equivalents and restricted cash at end of year $ 449,877 $ 313,977 $ 289,495 RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH Cash and cash equivalents at beginning of year $ 298,063 $ 283,056 $ 307,536 Restricted cash at beginning of year 15,914 6,439 85,743 Cash and cash equivalents and restricted cash at beginning of year $ 313,977 $ 289,495 $ 393,279 Cash and cash equivalents at end of year $ 428,710 $ 298,063 $ 283,056 Restricted cash at end of year 21,167 15,914 6,439 Cash and cash equivalents and restricted cash at end of year $ 449,877 $ 313,977 $ 289,495 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments for interest $ 22,476 $ 34,669 $ 38,231 NON-CASH TRANSACTIONS Liability for real estate additions, including $ 489 , $ 18 and $ 125 for development fees due to Vornado in 2020, 2019 and 2018, respectively $ 4,955 $ 3,191 $ 631 Write-off of fully amortized and/or depreciated assets 876 — 16,090 Reclassification of prepaid real estate taxes to construction in progress for property in redevelopment — 1,466 — Lease liability arising from the recognition of right-of-use asset — 5,428 — Derecognition of Rego Park II loan participation asset — — 195,708 See notes to consolidated financial statements. 46 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION Alexander’s, Inc. (NYSE: ALX) is a real estate investment trust (“REIT”), incorporated in Delaware, engaged in leasing, managing, developing and redeveloping its properties. All references to “we,” “us,” “our,” “Company” and “Alexander’s” refer to Alexander’s, Inc. and its consolidated subsidiaries. We are managed by, and our properties are leased and developed by, Vornado Realty Trust (“Vornado”) (NYSE: VNO). We have seven properties in the greater New York City metropolitan area consisting of: Operating properties • 731 Lexington Avenue, a 1,323,000 square foot multi-use building, comprising the entire block bounded by Lexington Avenue, East 59 th Street, Third Avenue and East 58 th Street in Manhattan. The building contains 920,000 and 155,000 of net rentable square feet of office and retail space, respectively, which we own, and 248,000 square feet of residential space consisting of 105 condominium units, which we sold. Bloomberg L.P. (“Bloomberg”) occupies all of the office space. The Home Depot ( 83,000 square feet) is the principal retail tenant; • Rego Park I, a 338,000 square foot shopping center, located on Queens Boulevard and 63 rd Road in Queens. The center is anchored by a 112,000 square foot IKEA, a 50,000 square foot Burlington, a 46,000 square foot Bed Bath & Beyond and a 36,000 square foot Marshalls; • Rego Park II, a 609,000 square foot shopping center, adjacent to the Rego Park I shopping center in Queens. The center is anchored by a 145,000 square foot Costco and a 133,000 square foot Kohl’s, which has been subleased. On September 10, 2020, Century 21 ($ 6,400,000 of annual revenue) filed for Chapter 11 bankruptcy and closed its 135,000 square foot store on December 7, 2020; • The Alexander apartment tower, located above our Rego Park II shopping center, contains 312 units aggregating 255,000 square feet; • Paramus, located at the intersection of Routes 4 and 17 in Paramus, New Jersey, consists of 30.3 acres of land that is leased to IKEA; and • Flushing, a 167,000 square foot building, located on Roosevelt Avenue and Main Street in Queens, that is sub-leased to New World Mall LLC for the remainder of our ground lease term. Property to be developed • Rego Park III, a 140,000 square foot land parcel adjacent to the Rego Park II shopping center in Queens, at the intersection of Junction Boulevard and the Horace Harding Service Road. We have determined that our properties have similar economic characteristics and meet the criteria that permit the properties to be aggregated into one reportable segment (the leasing, management, development and redeveloping of properties in the greater New York City metropolitan area). Our chief operating decision-maker assesses and measures segment operating results based on a performance measure referred to as net operating income at the individual operating segment. Net operating income for each property represents net rental revenues less operating expenses. 47 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. COVID-19 PANDEMIC Our business has been adversely affected by the ongoing COVID-19 pandemic. In March 2020, our “non-essential” retail tenants were ordered to temporarily close and although substantially all re-opened in the latter part of June 2020, there are limitations on occupancy and other restrictions that affect their ability to resume full operations. In limited circumstances, we have agreed to and may continue to agree to rent deferrals and abatements for certain of our tenants. We have made the policy election available to us based on the Financial Accounting Standards Board’s (“FASB”) guidance for leases during the COVID-19 pandemic, which allows us to continue recognizing rental revenue for rent deferral agreements and to recognize rent abatements as a reduction to rental revenue in the period granted. See Note 3 - Summary of Significant Accounting Policies for additional information. Overall, we have collected approximately 95 % of rent billed for the quarter ended December 31, 2020 ( 96 % including rent deferrals under agreements which generally require repayment in monthly installments over a period of time not to exceed twelve months), including 100 % for our office tenant, approximately 90 % for our retail tenants ( 91 % including rent deferrals) and approximately 98 % for our residential tenants. On September 10, 2020, Century 21, which leased 135,000 square feet at our Rego Park II shopping center ($ 6,400,000 of annual revenue), filed for Chapter 11 bankruptcy and closed its store on December 7, 2020. Based on our assessment of the probability of collecting rent from certain tenants, we have written off as uncollectible tenant receivables of $ 4,122,000 during the year ended December 31, 2020, resulting in a reduction of rental revenues. Of this amount, $ 2,716,000 is attributable to Century 21. In addition, we have written off receivables arising from the straight-lining of rents related to these tenants of $ 10,837,000 during the year ended December 31 2020, resulting in a reduction of rental revenues. Of this amount, $ 5,919,000 is attributable to Century 21. Prospectively, revenue recognition for these tenants will be based on actual amounts received. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation – The accompanying consolidated financial statements include our accounts and those of our consolidated subsidiaries. All intercompany amounts have been eliminated. Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Certain prior year balances have been reclassified in order to conform to the current period presentation. For the year ended December 31, 2018, “property rentals” of $ 152,795,000 and “expense reimbursements” of $ 80,030,000 were grouped into “rental revenues” on our consolidated statements of income in accordance with Accounting Standards Codification (“ASC”) Topic 205 Presentation of Financial Statements. Recently Issued Accounting Literature – In March 2020, the FASB issued an update (“ASU 2020-04”) establishing ASC Topic 848, Reference Rate Reform. ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. We are currently evaluating the impact of the guidance and our options related to the practical expedients. In April 2020, the FASB issued a Staff Q&A on accounting for leases during the COVID-19 pandemic, focused on the application of lease guidance in ASC Topic 842, Leases (“ASC 842”). The Staff Q&A states that it would be acceptable to make a policy election regarding rent concessions resulting from COVID-19, which would not require entities to account for these rent concessions as lease modifications when total cash flows resulting from the modified contract are “substantially the same or less” than the cash flows in the original contract. Entities making the election will continue to recognize rental revenue on a straight-line basis for qualifying concessions. In limited circumstances, we granted temporary rent deferrals and rent abatements to certain tenants as a result of the COVID-19 pandemic. We have made a policy election in accordance with the Staff Q&A allowing us to not account for these rent concessions as lease modifications. Accordingly, rent abatements are recognized as reductions to “rental revenues” during the period in which they were granted. Rent deferrals result in an increase to “tenant and other receivables” during the deferral period with no impact on rental revenue recognition. For any concessions that do not meet the guidance contained in the Staff Q&A, the modification guidance in accordance with ASC 842 will be applied. See Note 2 - COVID-19 Pandemic for further details. 48 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Real Estate – Real estate is carried at cost, net of accumulated depreciation and amortization. As of December 31, 2020 and 2019, the carrying amount of our real estate, net of accumulated depreciation and amortization, was $ 720,921,000 and $ 716,843,000 , respectively. Maintenance and repairs are generally expensed as incurred. Depreciation requires an estimate by management of the useful life of each property and improvement as well as an allocation of the costs associated with a property to its various components. We capitalize all property operating expenses directly associated with and attributable to, the development and construction of a project, including interest expense. The capitalization period begins when development activities are underway and ends when it is determined that the asset is substantially complete and ready for its intended use, which is typically evidenced by the receipt of a temporary certificate of occupancy. General and administrative costs are expensed as incurred. Our properties, including properties to be developed in the future, are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset, including an estimated terminal value calculated using an appropriate capitalization rate. Estimates of future cash flows are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. For our development properties, estimates of future cash flows also include all future expenditures necessary to develop the asset, including interest payments that will be capitalized as part of the cost of the asset. An impairment loss is recognized only if the carrying amount of the asset is not recoverable and is measured based on the excess of the property’s carrying amount over its estimated fair value. If our estimates of future cash flows, anticipated holding periods, or fair values change, based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses. Revenue Recognition – Our rental revenues include revenues from the leasing of space to tenants at our properties and revenues from parking and tenant services. We have the following revenue recognition policies: • Lease revenues from the leasing of space to tenants at our properties. Revenues derived from base rent are recognized over the non-cancelable term of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements. We commence rental revenue recognition when the underlying asset is available for use by the lessee. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease. Revenues derived from the reimbursement of real estate taxes, insurance expenses and common area maintenance expenses are generally recognized in the same period as the related expenses are incurred. As lessor, we have elected to combine the lease components (base and variable rent), non-lease components (reimbursements of common area maintenance expenses) and reimbursement of real estate taxes and insurance expenses from our operating lease agreements and account for the components as a single lease component in accordance with ASC 842. • Parking revenue arising from the rental of parking spaces at our properties. This income is recognized as the services are transferred in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). • Tenant services is revenue arising from sub-metered electric, elevator and other services provided to tenants at their request. This revenue is recognized as the services are transferred in accordance with ASC 606. Under ASC 842, we must assess on an individual lease basis whether it is probable that we will collect substantially all of the future lease payments. We consider the tenant’s payment history and current credit status when assessing collectability. When collectability is not deemed probable, we write-off the tenant’s receivables, including straight-line rent receivable, and limit lease income to cash received. We recognize changes in the collectability assessment of our operating leases as adjustments to rental revenues. Prior to the adoption of ASC 842, we maintained an allowance for doubtful accounts for estimated losses on receivables under our lease agreements, including receivables arising from the straight-lining of rent. During the year ended December 31, 2018, we had $ 4,459,000 of additions charged against operations and $ 5,289,000 of uncollectible accounts written off, with an ending allowance for doubtful accounts balance of $ 671,000 as of December 31, 2018. 49 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Cash and Cash Equivalents – Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less and are carried at cost, which approximates fair value, due to their short-term maturities. The majority of our cash and cash equivalents consist of (i) deposits at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation limit, (ii) United States Treasury Bills, (iii) money market funds, which invest in United States Treasury Bills and (iv) certificates of deposit placed through an account registry service (“CDARS”). To date we have not experienced any losses on our invested cash. Restricted Cash – Restricted cash primarily consists of security deposits and other cash escrowed under loan agreements, including for debt service, real estate taxes, property insurance and capital improvements. Marketable Securities – Our marketable securities consist of common shares of The Macerich Company (“Macerich”) (NYSE: MAC). These shares are presented at fair value on our consolidated balance sheets and gains and losses resulting from the mark-to-market of these securities are recognized in current period earnings in accordance with ASC Topic 825 (“ASC 825”), Financial Instruments (see Note 6). Deferred Charges – Direct financing costs are deferred and amortized over the terms of the related agreements as a component of interest and debt expense. Direct costs related to leasing activities are capitalized and amortized on a straight-line basis over the lives of the related leases. All other deferred charges are amortized on a straight-line basis, which approximates the effective interest rate method, in accordance with the terms of the agreements to which they relate. Income Taxes – We operate in a manner intended to enable us to continue to qualify as a REIT under Sections 856 – 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In order to maintain our qualification as a REIT under the Code, we must distribute at least 90 % of our taxable income to stockholders each year. We distribute to our stockholders 100 % of our taxable income and therefore, no provision for Federal income taxes is required. Dividends distributed for the year ended December 31, 2020 were characterized, for federal income tax purposes, as 100.0 % ordinary income. Dividends distributed for the year ended December 31, 2019 were characterized, for federal income tax purposes, as 99.6 % ordinary income and 0.4 % long-term capital gain income. Dividends distributed for the year ended December 31, 2018 were categorized, for federal income tax purposes, as 100.0 % ordinary income. The following table reconciles our net income to estimated taxable income for the years ended December 31, 2020, 2019 and 2018. (Unaudited and in thousands) Year Ended December 31, 2020 2019 2018 Net income $ 41,939 $ 60,075 $ 32,844 Straight-line rent adjustments 21,048 2,359 5,870 Depreciation and amortization 2,112 2,751 ( 6,586 ) Change in fair value of marketable securities (see Note 6) 8,599 8,757 11,990 Loss from discontinued operations (see Note 7) — — 23,797 Other 7,677 137 440 Estimated taxable income $ 81,375 $ 74,079 $ 68,355 As of December 31, 2020, the net basis of our assets and liabilities for tax purposes is approximately $ 139,364,000 lower than the amount reported for financial statement purposes. 50 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 4. REVENUE RECOGNITION The following is a summary of revenue sources for the years ended December 31, 2020, 2019 and 2018. Year Ended December 31, (Amounts in thousands) 2020 2019 2018 Lease revenues (1) $ 191,416 $ 217,251 $ 223,388 Parking revenue 4,207 5,608 5,680 Tenant services 3,519 3,491 3,757 Rental revenues $ 199,142 $ 226,350 $ 232,825 (1) Reduced by $ 14,959 and $ 209 for the years ended December 31, 2020 and 2019, respectively, for the write-off of lease receivables deemed uncollectable (primarily write-offs of receivables arising from the straight-lining of rents). The components of lease revenues for the years ended December 31, 2020 and 2019 are as follows: Year Ended December 31, (Amounts in thousands) 2020 2019 Fixed lease revenues $ 120,395 $ 142,679 Variable lease revenues 71,021 74,572 Lease revenues $ 191,416 $ 217,251 5. RELATED PARTY TRANSACTIONS Vornado As of December 31, 2020, Vornado owned 32.4 % of our outstanding common stock. We are managed by, and our properties are leased and developed by, Vornado, pursuant to the agreements described below, which expire in March of each year and are automatically renewable. Steven Roth is the Chairman of our Board of Directors and Chief Executive Officer, the Managing General Partner of Interstate Properties (“Interstate”), a New Jersey general partnership, and the Chairman of the Board of Trustees and Chief Executive Officer of Vornado. As of December 31, 2020, Mr. Roth, Interstate and its other two general partners, David Mandelbaum and Russell B. Wight, Jr. (who are also directors of the Company and trustees of Vornado) owned, in the aggregate, 26.1 % of our outstanding common stock, in addition to the 2.3 % they indirectly own through Vornado. Matthew Iocco, our Chief Financial Officer, is the Executive Vice President - Chief Accounting Officer of Vornado. Management and Development Agreements We pay Vornado an annual management fee equal to the sum of (i) $ 2,800,000 , (ii) 2 % of gross revenue from the Rego Park II shopping center, (iii) $ 0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue, and (iv) $ 334,000 , escalating at 3 % per annum, for managing the common area of 731 Lexington Avenue. Vornado is also entitled to a development fee equal to 6 % of development costs, as defined. Leasing and Other Agreements Vornado also provides us with leasing services for a fee of 3 % of rent for the first ten years of a lease term, 2 % of rent for the eleventh through the twentieth year of a lease term, and 1 % of rent for the twenty-first through thirtieth year of a lease term, subject to the payment of rents by tenants. In the event third-party real estate brokers are used, the fees to Vornado increase by 1 % and Vornado is responsible for the fees to the third-party real estate brokers. Vornado is also entitled to a commission upon the sale of any of our assets equal to 3 % of gross proceeds, as defined, for asset sales less than $ 50,000,000 and 1 % of gross proceeds, as defined, for asset sales of $ 50,000,000 or more. We also have agreements with Building Maintenance Services, a wholly owned subsidiary of Vornado, to supervise (i) cleaning, engineering and security services at our Lexington Avenue property and (ii) security services at our Rego Park I and Rego Park II properties and The Alexander apartment tower. 51 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. RELATED PARTY TRANSACTIONS - continued The following is a summary of fees to Vornado under the various agreements discussed above. Year Ended December 31, (Amounts in thousands) 2020 2019 2018 Company management fees $ 2,800 $ 2,800 $ 2,800 Development fees 489 29 125 Leasing fees 276 4,786 13 Property management, cleaning, engineering and security fees 5,051 5,015 4,101 $ 8,616 $ 12,630 $ 7,039 As of December 31, 2020, the amounts due to Vornado were $ 845,000 for management, property management, cleaning, engineering and security fees; $ 557,000 for development fees; and $ 114,000 for leasing fees. As of December 31, 2019, the amounts due to Vornado were $ 795,000 for management, property management, cleaning, engineering and security fees; $ 68,000 for development fees; and $ 563,000 for leasing fees. 6. MARKETABLE SECURITIES As of December 31, 2020 and 2019, we owned 564,612 and 535,265 common shares, respectively, of Macerich. The increase in shares owned was due to a dividend received in stock from Macerich during the year ended December 31, 2020. As of December 31, 2020 and 2019, the fair value of these shares was $ 6,024,000 and $ 14,409,000 , respectively, based on Macerich’s closing share price of $ 10.67 per share and $ 26.92 per share, respectively. These shares are presented at fair value as “marketable securities” on our consolidated balance sheets and the gains and losses resulting from the mark-to-market of these securities are recognized in current period earnings. 7. DISCONTINUED OPERATIONS In 2012, we sold the Kings Plaza Regional Shopping Center (“Kings Plaza”) and paid real property transfer taxes to New York City in connection with the sale. In 2015, the New York City Department of Finance (“NYC DOF”) issued a Notice of Determination to us assessing an additional New York City real property transfer tax amount, including interest. In 2014, in a case with similar facts, the NYC DOF issued a Notice of Determination to a Vornado joint venture assessing an additional New York City real property transfer tax amount, including interest. In January 2017, a New York City administrative law judge made a determination upholding the Vornado joint venture’s position that such additional real property transfer taxes were not due. On February 16, 2018, the New York City Tax Appeals Tribunal (the “Tribunal”) overturned the January 2017 determination. The Vornado joint venture appealed the Tribunal’s decision to the Appellate Division of the Supreme Court of the State of New York and on April 25, 2019, the Tribunal’s decision was unanimously upheld. The Vornado joint venture filed a motion to reargue the Appellate Division’s decision or for leave to appeal to the New York State Court of Appeals. On December 12, 2019, that motion was denied and the case can no longer be appealed. Based on the precedent of the Tribunal’s decision, we accrued an expense for the potential additional real property transfer taxes of $ 23,797,000 ($ 15,874,000 of real property transfer tax and $ 7,923,000 of interest) during the three months ended March 31, 2018. On April 5, 2018, we paid this amount in order to stop the interest from accruing. As the results related to Kings Plaza were previously classified as discontinued operations, we have classified the expense as “loss from discontinued operations” on our consolidated statement of income for the year ended December 31, 2018 in accordance with the provisions of ASC Topic 360, Property, Plant and Equipment . On January 12, 2021, we decided not to further contest the additional real property transfer taxes paid in connection with the sale of Kings Plaza. 52 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. MORTGAGES PAYABLE On February 14, 2020, we reduced our participation in our Rego Park II shopping center loan to $ 50,000,000 and received cash proceeds of approximately $ 145,000,000 . On September 14, 2020, we amended and extended the $ 350,000,000 mortgage loan on the retail condominium of our 731 Lexington Avenue property. Under the terms of the amendment, we paid down the loan by $ 50,000,000 to $ 300,000,000 , extended the maturity date to August 2025 and guaranteed the interest payments and certain leasing costs. The principal of the loan is non-recourse to us. The interest-only loan is at LIBOR plus 1.40 % ( 1.55 % as of December 31, 2020) which is subject to an interest rate swap with a fixed rate of 1.72 %. On October 23, 2020, we completed a financing of The Alexander apartment tower in the amount of $ 94,000,000 . The interest-only loan has a fixed rate of 2.63 % and matures in November 2027. The following is a summary of our outstanding mortgages payable. We may refinance our maturing debt as it comes due or choose to repay it. Interest Rate at December 31, 2020 Balance at December 31, (Amounts in thousands) Maturity 2020 2019 First mortgages secured by: Paramus Oct. 04, 2021 4.72 % $ 68,000 $ 68,000 731 Lexington Avenue, office condominium (1) Jun. 11, 2024 1.06 % 500,000 500,000 731 Lexington Avenue, retail condominium (2) Aug. 05, 2025 1.55 % 300,000 350,000 Rego Park II shopping center (3) Dec. 12, 2025 1.50 % 202,544 56,836 The Alexander apartment tower Nov. 01, 2027 2.63 % 94,000 — Total 1,164,544 974,836 Deferred debt issuance costs, net of accumulated amortization of $ 13,034 and $ 14,362 , respectively ( 8,374 ) ( 3,875 ) $ 1,156,170 $ 970,961 (1) Interest at LIBOR plus 0.90 %. Maturity date represents the extended maturity based on our unilateral right to extend. (2) Interest at LIBOR plus 1.40 % which is subject to an interest rate swap with a fixed rate of 1.72 %. (3) Interest at LIBOR plus 1.35 %. The amount of this loan is net of our loan participation of $ 50,000 and $ 195,708 as of December 31, 2020 and 2019, respectively. All of our debt is secured by mortgages and/or pledges of the stock of the subsidiaries holding the properties. The net carrying value of real estate collateralizing the debt amounted to $ 657,800,000 as of December 31, 2020. Our existing financing documents contain covenants that limit our ability to incur additional indebtedness on these properties, and in certain circumstances, provide for lender approval of tenants’ leases and yield maintenance to prepay them. As of December 31, 2020, the principal repayments (based on the extended loan maturity dates) for the next five years and thereafter are as follows: (Amounts in thousands) Year Ending December 31, Amount 2021 $ 68,000 2022 — 2023 — 2024 500,000 2025 502,544 Thereafter 94,000 53 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. FAIR VALUE MEASUREMENTS ASC Topic 820, Fair Value Measurement (“ASC 820”) defines fair value and establishes a framework for measuring fair value. ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Financial Assets and Liabilities Measured at Fair Value Financial assets measured at fair value on our consolidated balance sheets as of December 31, 2020 and 2019 consist of marketable securities which are presented in the table below based on their level in the fair value hierarchy, and an interest rate cap, the fair value of which was insignificant as of December 31, 2020 and 2019. Financial liabilities measured at fair value on our consolidated balance sheet as of December 31, 2020 consist of an interest rate swap which is presented in the table below based on its level in the fair value hierarchy. As of December 31, 2020 (Amounts in thousands) Total Level 1 Level 2 Level 3 Assets: Marketable securities $ 6,024 $ 6,024 $ — $ — Liabilities: Interest rate swap (included in other liabilities) $ 667 $ — $ 667 $ — As of December 31, 2019 (Amounts in thousands) Total Level 1 Level 2 Level 3 Assets: Marketable securities $ 14,409 $ 14,409 $ — $ — Financial Assets and Liabilities not Measured at Fair Value Financial assets and liabilities that are not measured at fair value on our consolidated balance sheets include cash equivalents and mortgages payable. Cash equivalents are carried at cost, which approximates fair value due to their short-term maturities and are classified as Level 1. The fair value of our mortgages payable is calculated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit ratings, which are provided by a third-party specialist, and is classified as Level 2. The table below summarizes the carrying amount and fair value of these financial instruments as of December 31, 2020 and 2019. As of December 31, 2020 As of December 31, 2019 Carrying Fair Carrying Fair (Amounts in thousands) Amount Value Amount Value Assets: Cash equivalents $ 393,070 $ 393,070 $ 263,688 $ 263,688 Liabilities: Mortgages payable (excluding deferred debt issuance costs, net) $ 1,164,544 $ 1,130,000 $ 974,836 $ 974,000 54 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. LEASES As Lessor We lease space to tenants under operating leases in an office building and in retail centers. The rental terms range from approximately 5 to 25 years. The leases provide for the payment of fixed base rents payable monthly in advance as well as reimbursements of real estate taxes, insurance and maintenance costs. Retail leases may also provide for the payment by the lessee of additional rents based on a percentage of their sales. We also lease residential space at The Alexander apartment tower with 1 or 2 year lease terms. We have elected to account for lease revenues (including fixed and variable rent) and the reimbursement of common area maintenance expenses as a single lease component presented as “rental revenues” on our consolidated statements of income. Future undiscounted cash flows under our contractual non-cancelable operating leases are as follows: (Amounts in thousands) As of December 31, 2020 For the year ending December 31, 2021 $ 132,812 2022 126,002 2023 127,115 2024 135,274 2025 124,595 Thereafter 475,364 These amounts do not include reimbursements or additional rents based on a percentage of retail tenants’ sales. Bloomberg accounted for revenue of $ 109,066,000 , $ 109,113,000 , and $ 107,356,000 in the years ended December 31, 2020, 2019 and 2018, respectively, representing approximately 55 %, 48 % and 46 % of our total revenues in each year, respectively. No other tenant accounted for more than 10% of our total revenues. If we were to lose Bloomberg as a tenant, or if Bloomberg were to be unable to fulfill its obligations under its lease, it would adversely affect our results of operations and financial condition. In order to assist us in our continuing assessment of Bloomberg’s creditworthiness, we receive certain confidential financial information and metrics from Bloomberg. In addition, we access and evaluate financial information regarding Bloomberg from other private sources, as well as publicly available data. As Lessee We are the lessee under a ground lease at our Flushing property, classified as an operating lease, which expires in 2027 and has one 10 -year extension option. On January 1, 2019, we recorded a right-of-use asset and lease liability related to this ground lease equal to the present value of the remaining minimum lease payments. As of December 31, 2020, the right-of-use asset of $ 3,974,000 and the lease liability of $ 4,236,000 , are included in “ other assets ” and “ other liabilities ,” respectively, on our consolidated balance sheet. The discount rate applied to measure the right-of-use asset and lease liability is based on the incremental borrowing rate (“IBR”) for the property of 4.53 %. We considered the general economic environment and factored in various financing and asset specific adjustments so that the IBR was appropriate to the intended use of the underlying lease. As we did not elect to apply hindsight, the lease term assumption determined under ASC Topic 840, Leases was carried forward and applied in calculating our lease liability recorded under ASC 842. 55 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. LEASES - continued Future lease payments under this operating lease, excluding the extension option, are as follows: (Amounts in thousands) As of December 31, 2020 For the year ending December 31, 2021 $ 800 2022 800 2023 800 2024 800 2025 800 Thereafter 800 Total undiscounted cash flows 4,800 Present value discount ( 564 ) Lease liability as of December 31, 2020 $ 4,236 We recognize rent expense as a component of “operating” expenses on our consolidated statements of income on a straight-line basis. Rent expense was $ 746,000 in each of the years ended December 31, 2020, 2019 and 2018, respectively. Cash paid for rent expense was $ 800,000 in each of the years ended December 31, 2020, 2019 and 2018, respectively. 11. STOCK-BASED COMPENSATION We account for stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). Our 2016 Omnibus Stock Plan (the “Plan”) provides for grants of incentive and non-qualified stock options, restricted stock, stock appreciation rights, deferred stock units (“DSUs”) and performance shares, as defined, to the directors, officers and employees of the Company and Vornado. In May 2020, we granted each of the members of our Board of Directors 329 DSUs with a market value of $ 75,000 per grant. The grant date fair value of these awards was $ 56,250 per grant, or $ 450,000 in the aggregate, in accordance with ASC 718. In addition, 876 DSUs, constituting an initial award with a market value of $ 200,000 , were granted to a newly appointed Director. The grant date fair value of this award was $ 150,000 in accordance with ASC 718. The DSUs entitle the holders to receive shares of the Company’s common stock without the payment of any consideration. The DSUs vested immediately and accordingly, were expensed on the date of grant, but the shares of common stock underlying the DSUs are not deliverable to the grantee until the grantee is no longer serving on the Company’s Board of Directors. As of December 31, 2020, there were 14,916 DSUs outstanding and 490,871 shares were available for future grant under the Plan. 56 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. COMMITMENTS AND CONTINGENCIES Insurance We maintain general liability insurance with limits of $ 300,000,000 per occurrence and per property, of which the first $ 1,000,000 includes communicable disease coverage, and all-risk property and rental value insurance coverage with limits of $ 1.7 billion per occurrence, including coverage for acts of terrorism, with sub-limits for certain perils such as floods and earthquakes on each of our properties and excluding communicable disease coverage. Fifty Ninth Street Insurance Company, LLC (“FNSIC”), our wholly owned consolidated subsidiary, acts as a direct insurer for coverage for acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by the Terrorism Risk Insurance Act of 2002, as amended to date and which has been extended through December 2027. Coverage for acts of terrorism (including NBCR acts) is up to $ 1.7 billion per occurrence and in the aggregate. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to FNSIC. For NBCR acts, FNSIC is responsible for a $ 275,000 deductible and 20 % of the balance of a covered loss, and the Federal government is responsible for the remaining 80 % of a covered loss. We are ultimately responsible for any loss incurred by FNSIC. We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism or other events. However, we cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for uninsured losses and for deductibles and losses in excess of our insurance coverage, which could be material. The principal amounts of our mortgage loans are non-recourse to us and the loans contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties. Paramus In 2001, we leased 30.3 acres of land located in Paramus, New Jersey to IKEA. The lease expires in 2041, with a purchase option in October 2021 for $ 75,000,000 . The property is encumbered by a $ 68,000,000 interest-only mortgage loan with a fixed rate of 4.72 %, which matures in October 2021. The annual triple-net rent is the sum of $ 700,000 plus the amount of interest on the mortgage loan. If the purchase option is exercised, we will receive net cash proceeds of approximately $ 7,000,000 and recognize a gain on sale of land of approximately $ 60,000,000 . If the purchase option is not exercised, the triple-net rent for the last 20 years would include debt service sufficient to fully amortize $ 68,000,000 over the remaining 20 -year lease term. Rego Park I Litigation In June 2014, Sears Roebuck and Co. (“Sears”) filed a lawsuit in the Supreme Court of the State of New York against Vornado and us (and certain of our subsidiaries) with regard to the 195,000 square foot store that Sears formerly leased at our Rego Park I property alleging that the defendants are liable for harm that Sears has suffered as a result of (a) water intrusions into the premises, (b) two fires in February 2014 that caused damages to those premises, and (c) alleged violations of the Americans with Disabilities Act in the premises’ parking garage. Sears asserted various causes of actions for damages and sought to compel compliance with landlord’s obligations to repair the premises and to provide security, and to compel us to abate a nuisance that Sears claims was a cause of the water intrusions into its premises. In addition to injunctive relief, Sears sought, among other things, damages of not less than $ 4,000,000 and future damages it estimated would not be less than $ 25,000,000 . In March 2016, Sears withdrew its claim for future damages leaving a remaining claim for property damages, which we estimate to be approximately $ 650,000 based on information provided by Sears. We intend to defend the remaining claim vigorously. The amount or range of reasonably possible losses, if any, is not expected to be greater than $ 650,000 . On October 15, 2018, Sears filed for Chapter 11 bankruptcy relief resulting in an automatic stay of this case. Letters of Credit Approximately $ 960,000 of standby letters of credit were issued and outstanding as of December 31, 2020. Other There are various other legal actions against us in the ordinary course of business. In our opinion, the outcome of such matters in the aggregate will not have a material effect on our financial position, results of operations or cash flows. 57 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13. MULTIEMPLOYER BENEFIT PLANS Our subsidiaries make contributions to certain multiemployer defined benefit plans (“Multiemployer Pension Plans”) and health plans (“Multiemployer Health Plans”) for our union represented employees, pursuant to the respective collective bargaining agreements. Multiemployer Pension Plans Multiemployer Pension Plans differ from single-employer pension plans in that (i) contributions to multiemployer plans may be used to provide benefits to employees of other participating employers and (ii) if other participating employers fail to make their contributions, each of our subsidiaries may be required to bear their pro rata share of unfunded obligations. If a participating subsidiary withdraws from a plan in which it participates, it may be subject to a withdrawal liability. As of December 31, 2020, our subsidiaries’ participation in these plans were not significant to our consolidated financial statements. In the years ended December 31, 2020, 2019 and 2018 our subsidiaries contributed $ 191,000 , $ 172,000 and $ 161,000 , respectively, towards Multiemployer Pension Plans. Our subsidiaries’ contributions did not represent more than 5% of total employer contributions in any of these plans for the years ended December 31, 2020, 2019 and 2018. Multiemployer Health Plans Multiemployer Health Plans in which our subsidiaries participate provide health benefits to eligible active and retired employees. In the years ended December 31, 2020, 2019 and 2018 our subsidiaries contributed $ 672,000 , $ 686,000 and $ 649,000 , respectively, towards these plans. 14. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted income per share, including a reconciliation of net income and the number of shares used in computing basic and diluted income per share. Basic income per share is determined using the weighted average shares of common stock (including DSUs) outstanding during the period. Diluted income per share is determined using the weighted average shares of common stock (including DSUs) outstanding during the period, and assumes all potentially dilutive securities were converted into common shares at the earliest date possible. There were no potentially dilutive securities outstanding during the years ended December 31, 2020, 2019 and 2018. Year Ended December 31, (Amounts in thousands, except share and per share amounts) 2020 2019 2018 Income from continuing operations $ 41,939 $ 60,075 $ 56,641 Loss from discontinued operations (see Note 7) — — ( 23,797 ) Net income $ 41,939 $ 60,075 $ 32,844 Weighted average shares outstanding – basic and diluted 5,120,922 5,118,198 5,116,838 Income from continuing operations $ 8.19 $ 11.74 $ 11.07 Loss from discontinued operations (see Note 7) — — ( 4.65 ) Net income per common share – basic and diluted $ 8.19 $ 11.74 $ 6.42 58 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.