VORNADO REALTY TRUST 84 NOTES TO CONSOLIDATED FINANCIAL STA TEMENTS The following table provides a reconciliation of both net income and the number of common shares used in the computation of (i) basic income per common share—which utilizes the weighted average number of common shares outstanding without regard to dilutive potential common shares, and (ii) diluted income per common share—which includes the weighted average common shares and dilutive share equivalents. Potential dilutive shar e equivalents include the Company’s Series A Convertible Preferred shares as well as Vornado Realty L.P.’s convertible preferred units. 15.  Income Per Share Year Ended December 31, (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2003 2002 2001 Numerator: Income before discontinued operations, gains on sale of real  estate and cumulative effect of change in accounting principle  $284,841 $ 253,148 $ 242,011 Discontinued operations 14,073 9,884 10,342 Gains on sale of real estate (discontinued operations in 2003) 161,789 — 15,495 Cumulative effect of change in accounting principle — (30,129) (4,110) Net income 460,703 232,903 263,738 Preferred share dividends (20,815) (23,167) (36,505) Numerator for basic income per share—net income applicable to  common shares 439,888 209,736 227,233 Impact of assumed conversions: Series A convertible preferred share dividends 3,570 — — Numerator for diluted income per share—net income applicable to  common shares $443,458 $ 209,736 $ 227,233 Denominator: Denominator for basic income per share—weighted average shares 112,343 105,889 89,109 Effect of dilutive securities: Series A convertible preferred shares 1,522 — — Employee stock options and restricted share awards 2,786 3,780 2,964 Denominator for diluted income per share— adjusted weighted average shares and  assumed conversions 116,651 109,669 92,073 INCOME PER COMMON SHARE—BASIC: Income before discontinued operations, gains on sale  of real estate and cumulative effect of  change in accounting principle $ 2.35 $ 2.17 $ 2.31 Discontinued operations 0.13 .09 .12 Gains on sale of real estate (discontinued operations in 2003) 1.44 — .17 Cumulative effect of change in accounting principle — (.28) (.05) Net income per common share $ 3.92 $ 1.98 $ 2.55 INCOME PER COMMON SHARE—DILUTED: Income before discontinued operations, gains on sale of real  estate and cumulative effect of change in  accounting principle $ 2.29 $ 2.09 $ 2.23 Discontinued operations 0.12 .09 .11 Gains on sale of real estate (discontinued operations in 2003) 1.39 — .17 Cumulative effect of change in accounting  principle — (.27) (.04) Net income per common share $ 3.80 $ 1.91 $ 2.47