In addition to new store designs and layouts, we'll introduce Seattle's Best Coffee cafes and Paperchase gift and stationery shops to a majority of our new and remodeled superstores, helping us to differentiate our in-store experience, boost category sales and increase traffic.

And we will continue to convert select Waldenbooks locations to Borders Express stores as part of a pilot program we began in 2004.

To gain the greatest advantage from these investments, we'll implement them region by region, beginning in the western states. This market-based approach will enable us to focus advertising and promotion activities across our store formats more effectively and, ultimately, build greater awareness of and value for the Borders brand.

We opened the first Seattle's Best Coffee® cafes in our six Oregon stores in February 2005. By year-end, we plan to launch the new cafes in all new and most remodeled domestic superstores, and we'll expand the concept to more than 400 stores over the next few years. Seattle's Best Coffee's outstanding quality and cafe expertise will help us deliver a distinctive experience to Borders customers, creating strong opportunities for growth within the category.

In July 2004, we acquired Paperchase® Products Limited, a high-profile U.K.-based stationery designer and retailer with more than 70 outlets, including stand-alone stores and concessions. For many years, the brand's unique products have performed extremely well in Borders International stores, helping to drive strong sales gains in our U.K. and Asia Pacific gift and stationery business. We plan to launch Paperchase shops in all new and most remodeled domestic superstores in 2005 as part of a long-term plan to introduce Paperchase to America. Over time, this may include test marketing freestanding stores and other selling opportunities, modeling the brand's successful business formats in the U.K.

We piloted the conversion of 37 Waldenbooks stores to Borders ExpressTM stores in 2004, and the early results have been encouraging. Customers tell us they like the clean, stylish design of the new stores, which offer an expanded merchandise selection — including music, movies, gifts and stationery — and lower everyday pricing on a broad selection of bestsellers. During 2005, we'll expand the conversion program to approximately 75 to 100 additional stores, as we seek to create a more compelling mall-store presence, and deliver more consistent brand value across all our formats.