DOLLAR TREE STORES, INC. • 2004 ANNUAL REPORT 27 Year Ended Year Ended Month Ended  Year Ended January 29, January 31, February 1, December 31, (In thousands, except per share data) 2005 2004 2003 2002 Net sales $3,126,009 $2,799,872 $160,789 $2,329,188 Cost of sales (Note 12) 2,013,470 1,781,459 113,572 1,477,214 Gross profit 1,112,539 1,018,413 47,217 851,974 Selling, general and administrative expenses  (Notes 8 and 12) 818,988 724,816 55,645 598,053 Operating income (loss) 293,551 293,597 (8,428) 253,921 Interest income 3,860 2,648 389 3,526 Interest expense (10,298) (8,382) (719) (4,519) Changes in fair value of non-hedging  interest rate swaps (Note 6) 1,057 889 239 (1,469) Income (loss) before income taxes and cumulative effect of a change in accounting principle 288,170 288,752 (8,519) 251,459 Provision for income taxes (Note 3) 107,920 111,169 (3,279) 96,812 Income (loss) before cumulative effect  of a change in accounting principle 180,250 177,583 (5,240) 154,647 Cumulative effect of a change in accounting principle, net of tax benefit of $3,309 (Note 12) — — (5,285) — Net income (loss) $ 180,250 $ 177,583 $ (10,525) $ 154,647 Basic net income (loss) per share (Note 7): Income (loss) before cumulative effect of a change  in accounting principle $ 1.59  $ 1.55 $ (0.05) $ 1.36 Cumulative effect of a change in  accounting principle — — (0.04) — Net income (loss) $ 1.59  $ 1.55 $ (0.09) $ 1.36 Diluted net income (loss) per share (Note 7): Income (loss) before cumulative effect of a change  in accounting principle $ 1.58 $ 1.54 $ (0.05) $ 1.35 Cumulative effect of a change in  accounting principle — — (0.04) — Net income (loss) $ 1.58 $ 1.54 $ (0.09) $ 1.35 See accompanying Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF OPERATIONS