NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 7 – SHAREHOLDERS’ EQUITY Preferred Stock Net Income (Loss) Per Share The Company is authorized to issue 10,000,000 shares of Preferred Stock, $0.01 par value per share. No preferred shares are issued and outstanding at January 29, 2005, January 31, 2004, February 1, 2003 and December 31, 2002. The following table sets forth the calculation of basic and diluted net income (loss) per share: At January 29, 2005, January 31, 2004, February 1, 2003 and December 31, 2002, respectively, 1,457,329, 203,015, 2,171,350 and 1,704,153 stock options are not included in the calculation of the weighted average number of shares and dilutive potential shares outstanding because their effect would be anti-dilutive. 42 DOLLAR TREE STORES, INC. • 2004 ANNUAL REPORT Year Ended Year Ended  Month Ended  Year Ended  January 29, January 31, February 1, December 31, 2005 2004 2003 2002 Basic net income (loss) per share: Income (loss) before accounting change $180,250 $177,583 $ (5,240) $154,647 Cumulative effect of a change in accounting principle, net of tax benefit of $3,309 — — (5,285) — Net income (loss) $180,250 $177,583 $(10,525) $154,647 Weighted average number of shares outstanding 113,296 114,641 114,224 113,637 Basic income (loss) before accounting change per share $ 1.59 $ 1.55 $ (0.05) $ 1.36 Cumulative effect of a change in accounting principle per share — — (0.04) — Basic net income (loss) per share $ 1.59  $ 1.55 $ (0.09) $ 1.36 Diluted net income (loss) per share: Income (loss) before accounting change $180,250 $177,583 $ (5,240) $154,647 Cumulative effect of a change in accounting principle, net of tax benefit of $3,309 — — (5,285) — Net income (loss) $180,250 $177,583 $(10,525) $154,647 Weighted average number of shares outstanding 113,296 114,641 114,224 113,637 Dilutive effect of stock options and restricted stock  (as determined by applying the treasury stock method) 690 940 437 910 Weighted average number of shares and dilutive potential shares  outstanding 113,986 115,581 114,661 114,547 Diluted income (loss) before accounting change per share $ 1.58 $ 1.54 $ (0.05) $ 1.35 Cumulative effect of a change in accounting principle per share — — (0.04) — Diluted net income (loss) per share $ 1.58 $ 1.54 $ (0.09) $ 1.35