Good morning. My name is Steven, and I will be a conference facilitator today. At this time, I would like to welcome everybody to the UPS Investor Relations Second Quarter 2010 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to your host, Mr. Andy Dolny, Vice President of Investor Relations. The floor is yours, sir. Please go ahead.

Good morning, everyone. Thanks for joining us today. Scott Davis, our CEO, and Kurt Kuehn, our CFO, will discuss the second quarter results and our expectations going forward. Before they begin, however, I want to review the Safe Harbor language. Some of the comments we'll make today are forward-looking statements that address our expectations for the future performance or results of operations of the company. These anticipated results are subject to risk and uncertainties, which are described in detail in our 2009 form 10-K and first quarter 10-Q reports. These reports are available on the UPS Investor Relations website or from the Securities and Exchange Commission. Today's call is being webcast and will also be available on our Investor Relations website. I want to remind you of an adjustment we made in the second quarter of 2009 for certain foreign currency obligations which did not qualify for hedge accounting treatment. The after tax impact of this charge was $48 million or $0.05 per share. In the remarks today, Scott and Kurt will refer to UPS' second quarter 2009 results excluding the impact of this charge. Additionally, all 2010 full year references and comparisons to 2009 will refer to adjusted results. We believe this is a more accurate picture of the company's performance. Reconciliation to comparable GAAP measures is explained in the schedules that accompanied our earnings news release this morning. The schedules are also available on the UPS IR website in the Financials section. Finally, during the call, we refer to free cash flow, which is a non-GAAP financial measure. A reconciliation is also included in the news announcement this morning and is available on the UPS Investor Relations website. To begin our review of the quarter, I'll turn the program over to Scott.

Thanks, Andy. Good morning, everyone. We continue to see strong momentum in 2010 as evidenced by our results announced this morning. UPS earnings jumped 71% on revenue growth of 13% with improvement across all business units. Now, this was achieved despite the fact that mixed economic signals continue to dominate the headlines. The U.S. is witnessing strong corporate earnings and moderate GDP growth, although employment and housing data remain weak. The debt crisis in Europe has kept everyone's interest, the stock markets around the globe reflecting this uncertainty. Yet, we are pleased that our European business showed solid growth again this quarter. And Asia continued to experience significant economic expansion. Our export volumes in the region grew over 40%. UPS has exceeded this environment while also investing to further strengthen our global network. In the quarter, we enhanced and built new relationships with partners in Asia. UPS expanded the reach for our services through strategic alliances in Vietnam and in Malaysia, providing greater access to customers in these important emerging markets. In May, UPS announced a significant new partnership in China with Alibaba, the world's largest small business e-commerce company. The agreement benefits UPS by giving us access to small and medium-size wholesalers through their new online marketplace. This platform provides easy use of our services for Chinese suppliers and eventually will be available to users around the globe. Our approach to international expansion, using alliances, service partners and acquisitions, has proved to be successful. The evidence can be seen in the strong international growth UPS has delivered over the years. We are confident in this strategy. In fact, during the quarter, UPS was recognized as the market leader in Poland by industry trade magazines and the local press, accomplishing this in just five years following our acquisition of Stalicha.…

Thanks, Scott, and good morning. It's good to talk to you today, especially turning in great results like this. UPS global revenue was up 13%, with operating profits skyrocketing 57%. This is despite a mixed global economic environment. The operating leverage we demonstrated in the first quarter has continued as witnessed by our margin expansion of 320 basis points. For the third quarter in a row, our compensation and benefit expense grew at a slower rate than volume. The numerous changes that UPS has made and the investments in our global network are paying off. Our progress on these has led us to increase our 2010 earnings guidance. Now let's look at the segments, starting with U.S. Domestic Package. Operating profit is up 57% on a 7% revenue gain. This increase was driven by yield improvements, increased volume, network efficiencies and superb execution. As a result, operating margin was 10.3%, an increase of 330 basis points. Average daily volume increased more than 1% with ground up 2%. We are also beginning to see UPS customers trade up to premium services, and that is encouraging. While volume in our Next Day Air was flat overall, we saw solid growth in Next Day Package, although this was offset by a decline in our Letter products. This positive mix shift helped drive our 11% improvement in air yields. Total Domestic revenue per piece increased 6%, driven by stronger base rates and higher fuel surcharges. Our focus on yield management is clearly showing results. The U.S. operations team executed this quarter to near perfection with improved productivity, service and cost management. With an increased volume, UPS direct labor hours, miles driven and block hours were all down. A job well done when you also consider the challenges presented by our U.S. restructuring. We experienced…

[Operator Instructions] Our first question in queue will come from the line of Mr. Jon Langenfeld of Robert W. Baird. Jon Langenfeld - Robert W. Baird & Co. Incorporated: Can you talk a little bit about your weight per shipment both in the ground side as well as on the Domestic Express side?

Yes, great. The weight per shipment was a positive trend across most of the businesses. It was definitely notable in our International Express services as heavier goods moved. In the Domestic, it's a little bit of a mixed picture. We saw very notably in our Next Day Air Package segment as growth begin to kick in and also weights went up. The Ground business was up moderately but not materially, but clearly, the rising weights is a positive leading indicator and we were pleased to see that. Jon Langenfeld - Robert W. Baird & Co. Incorporated: It sounds like there’s still room to grow on the domestic side.

John, I think that we're still pretty optimistic on industrial production continuing to grow. It clearly outpaced GDP this year. That's just the best barometer for us. If manufacturing kicks in, we should see heavier products both in the Ground and Air.

Our next question will come from the line of Mr. Gary Chase of Barclays Capital.

I was curious to get a little bit more color on, Kurt, you were talking about in-country cost internationally going down 4%. Wondered if you could just give a little bit more color on what you're doing there to drive that and sort of how far along in that process we are.

Yes, Gary, the catalyst for this was the downturn we had as the economy to began to hit the skids. And we did shift gears pretty dramatically from what had been a decade of unimpeded growth to tightening up and just our challenging our network. So the recession was a challenge in our International business, but it also gave us an opportunity, really, to go in and streamline and make more efficient some of our processes. So what you're seeing now is a more highly tuned network, with volume back up dramatically. So we’re getting economies of scale, and we’ve got the core efficiencies that we can hang on to.

And then just a quick one, the $25 million in headwind that you referred to, is that net of edges, and can you tell us how much the hedges are offsetting if it is?

Yes, that's certainly net of hedges. We use a collar strategy where we protect most of the downside and give up in some cases some of the upside. So certainly the euro has been very volatile; that is by far our largest exposure. And the $25 million estimate basically assumes the euro stays in the upper 120s where it is today. We do have protection if it gets much worse, so we don't think the currency could get much worse than that. But certainly, that is something that we’re very active with and we constantly hedge to reduce some of the volatility. And it did that for the second quarter; third and fourth we’ll see some headwinds, but still much less volatile than it would be otherwise.

Our next question’ll come from the line of Mr. Tom Wadewitz of JPMorgan. Thomas Wadewitz - JP Morgan Chase & Co: On the yields, I was wondering if you could give a little sense of how much of the yield in Air and Ground is base price increase and how much is fuel surcharge in mix? And I guess then, in terms of the price, whether that accelerates going forward? So I guess a question on yield and price?

Yes, it’s a little different story for each of the products. In the Ground, certainly, the majority of the yield increase is base pricing as we've not seen much of a tailwind from weight. So that's probably the best indication as far as the status. There is some tailwind. On the Air side, somewhere around half would be fuel, and there is a little bit of a mix benefit. We’ve talked about that Package is growing substantially, more than Letters, which are declining. Clearly, with the very low numbers of new home sales and year-over-year negatives on refinancing, the Letter business is being challenged. But the weight did help on the Air also. But now, we feel very good about our yield management campaign, Tom. As we've said, we've made that a priority. And so it's a gradual process, but we're pleased to see the benefits of that. Thomas Wadewitz - JP Morgan Chase & Co: And then a follow-up, you were pretty helpful with the comments in currency impact in second half, $25 million a quarter. If the euro and exchange rates where they are today, what would the impact be in 2011? Presumably there’s somewhat of a headwind. Is that another $50 million headwind or more or less than that?

Yes, we are pretty well-hedged for next year, although clearly over multiple years we can’t be indifferent to it. So there is some risk to that. We're not ready yet to give any specific numbers, Tom, but the goal that we have is to not been indifferent to it. We think it’s too expensive to try to hedge away all volatility, but also to make sure that it never becomes the primary story.

Tom, our practice for the last decade has been to try to hedge a year in advance, and we’ve stuck with that practice.

Our next question’ll come from the line of Mr. Edward Wolfe of Wolfe Trahan.

I hate to pick apart of a nice-looking quarter, but if there's one thing that I look at here, the Domestic volume, up 1.2%, how do you think about that and particularly the Air, obviously, which domestically is weak? And what's in your guidance going forward in the second half for your volume expectations domestically?

Ed, we did guide this year that we thought that the Air business would underperform the Ground business. Clearly, last year we had the benefit of the overlap with DHL's retreat from the domestic market. Our guidance is not assuming any dramatic economic uptick. That was one of the things we wanted to make clear. But we do think that we will see our volumes somewhere around GDP growth rates for the remainder of the year. We get a little bit of a tailwind, frankly, in Q3 with the way the calendar hits. Fourth of July last year added an operating day to us without much extra volume. So there's a little bit of a tailwind there. So we do see third quarter volumes improving over the second quarter, and then the fourth quarter will depend a lot, certainly, on how the holidays turn out. But all in all, we're pretty confident that our volumes should be growing at GDP rates.

And on the other side, Ed, I think the numbers are little misleading because frankly, our Next Day Package business was pretty good in the quarter, where our Next Day Letters were down fairly significantly so that the Package business on the Air side was better than the overall results showed.

Can you give some numbers around that?

Oh, Next Day Package was up around 2%. So it actually did show some growth.

Our next question in queue will come from the line of Mr. Scott Malat of Goldman Sachs.

Following up on Ed’s question a little bit, I just wanted to better understand what you see kind of as the elasticity of demand. Maybe if you can help us think about, I think the volumes are fine where they are, but as you take up price, how are those accounts volumes versus accounts that you haven’t addressed yet, or are there any buying pattern changes in those accounts that you’ve addressed price?

No, so far, we've got pretty good success, we think that we are, as we said, our top priority for this year is stabilizing the pricing environment. So on the increment, there may be some accounts that plus or minus. But in general, we've been pleased with our ability to sustain rate increases without significant impact from our customers. So we do think the market will continue to grow gradually. We've been forecasting this being a gradual economic recovery, and I think, clearly, it's playing out that way. But we feel pretty good about our ability to sustain modest but substantial rate increases and at the same time, continue to grow with the economy.

I think generally the small package market didn't drop as much as the overall economy did during the recession. Into the recovery, I think you'll start seeing the small package market catch up to GDP and IT levels as we move through this recovery. So you'll see it get better.

And then following up just on the volumes, maybe on inventory restocking last quarter, you said you were in the early stages. Should this be a tailwind as we continue to go forward or are most of the benefits behind us? Where are we on that?

I think we're just partway through this game. I think the inventory-to-sales ratio has gone up some but is still well below the prerecession levels. So I would think you’re going to still see more restocking. I think we saw not quite as much in the second quarter as we saw in the first. But I expect to see that in the second half of the year continue.

Our next question comes from the line of Mr. Ken Hoexter of Merrill Lynch.

Scott, just following up on that, where is the confidence of the shippers? Are they moving to really start increasing that? I'm just wondering as we look forward to peak shipping season, what are your discussions like as shippers start to prepare for that?

It's early to talk I think on peak season in the U.S. I think you started to see some talk on the ocean side in heavy freight. You start to see that pick up. I think it's pretty good confidence out there that certainly the technology companies have had a banner 12 months, and I don't see that letting up in the near term. So I think it feels pretty good if B2C stays strong. We saw more improvement in B2B over the last quarter or two. So despite Chairman Bernanke saying all the usual uncertainty out there, I think overall, our shippers are still pretty good.

I guess when I look at the growth at the Ground, the 1.8% volume growth, is there a difference between what we’re seeing on that Parcel Direct there, that kind of direct-to-home versus what you’re seeing on standard packages?

Historically, the B2C, the direct-to-home has significantly outgrown the B2B. We've actually seen those two growth rates equalize more and more. This has been more of a B2B recovery. And that's evidence of what Scott talking about with industrial production and some of those things. So this is probably as close as the two have been in a number of years.

Our next question comes from the line of Robin Byde of HSBC.

Just a follow up on yields. On international domestic

Our next question comes from the line of Robin Byde of HSBC.

Just a follow-up on yields. On international and domestic yields, if we’ve got our numbers correct, I think you fell by about 5% in the quarter year-on-year. If that is correct, could you just explain the reasons for that, please?

Yes, Robin. We’ve got one big event in there that makes it a little hard to really peel back what’s going on in that, and that was our acquisition in Turkey that has dramatically increased our growth rates. The average yield in that country is far below the more developed markets of Europe and Canada. If you took out Turkey, we would actually show a slight positive for yield on our domestics. So we're very comfortable with the pricing in our domestics. We've actually been thrilled to see the substantial demand, even with Europe being the lion’s share of that, for our services. So that will wrap around next quarter. Third quarter, you will have half of Turkey comp in there and the other half. And then I think once we get past that, you'll see a more stable, maybe slightly increasing yield in our domestics. So it’s certainly not through price that we've been gaining this outside share.

Our next question will come from the line of Mr. Bill Greene of Morgan Stanley.

Just a quick question. Can you give us the percentage of the business in the domestic market that's B2C?

Domestic U.S.? It runs about a third.

So it hasn’t really grown? Because I thought it had been growing faster. In the past, we sort of said it got a percent or so a year in share, if you will.

I think that’s about right. I think it’s been over the last probably 20 years it's been going about a percent a year. So I don't think it’s changed dramatically.

And how is that compared to Europe?

Bill, as I said, right now we’re actually seeing B2C and B2B growth fairly similarly, given the current economy. Europe would be a lower percentage. I don't have exact numbers, but it's certainly much lower. Our focus there has been more business-to-business, more focused on export, which tends to be more business-oriented. Although, clearly there's a lot of companies in Europe and a lot of global companies that are looking more and more B2C and that is a rapidly growing area.

Just a question on cash. I realize that you run a conservative balance sheet, but you're sitting on a lot of cash. And even some of the railroads are buying back more stock than you are, and I don't think we could say that they are more cash-positive than UPS. So I just don't understand that sort of conservatism that you're having relating to sort of stock buybacks and return of capital.

Bill, thanks for that question. And I tried to be explicit on it in my prepared remarks. But right now, our intention is to get our S&P outlook improved. They had concerns, given last year's results, of our funds flow from operation to debt margin. They gave us a benchmark. We're very confident we will meet that the benchmark this year way ahead of schedule. And until that point, our strategy is to repurchase enough stock to avoid dilution through our stock compensation. After that, we will revisit that, and certainly we have a commitment to return capital to share owners. And of course given where taxes are may make a difference also.

Absolutely. Certainly our distribution policy has been strong. We’ve distributed most of our earnings the last several years. We’ll watch very closely what happens in Congress through the end of 2010 and figure out what happens on tax policy. And that certainly could impact the dividends versus share repurchase.

Our next question will come from the line of Mr. Matt Brooklier of Piper Jaffray.

Two questions; one international, the other domestic. You guys had some cautious commentary in your press release regarding kind of your outlook in Europe. I was just wondering if you could provide some more color there. Is it just you positioning yourselves for the potential for slowdown, or are you currently seeing a slowdown within that part of the world?

I actually think that Europe has been somewhat of a pleasant surprise based on all the media highlighted this year in sort of the [ph] sovereign debt crisis. In fact, I just came back from a conference with about 100 CEOs and we talked about Europe. And all of us are guarded about Europe just because all the unknown, but I think all of us are seeing pretty good business in Europe. In reality, I think the outlook for the Euro zone GDP has probably dropped from like a 1.5% growth rate to a 1% growth rate through all of this hoopla on the sovereign debt issue. So I don't think it's changed that dramatically, and certainly our business has been very strong. We talked about the digit growth in our European export products and you saw the growth in European domestic products. So it actually feels pretty good over there. We're going to be watchful and see what happens, but right now it feels pretty good in Europe.

And on the Domestic Package side, I think Kurt mentioned some cost benefits and some cost minuses during the second quarter. I think I heard a $0.02 number. Can you just talk a little bit about what the net impact was there from a cost perspective and how do we think about operating margins with that Domestic Package going forward?

Yes, we did execute the lion's share of the restructuring and we did see a significant amount of expenses in the second quarter; things like relocations of training. Although, we also were able to get some of the labor savings a little quicker than our plan. So the net impact for Q2 was about a $0.02 headwind overall of cost. That will improve in the third quarter, where the amount of reloads [ph] begin to taper down. So it will be a very modest positive in the third quarter, and then in the fourth quarter, we’ll see more of the benefit. But we do continue to estimate about a $0.10 a share benefit from the Domestic restructuring. That will be manifest for 2011. Clearly, it's one of the things we have going into next year that will be a positive. So the overall restructuring was the net positive $0.02 a share; a little better than, frankly, we’d thought. But on top of that is just the ongoing benefit from the wide array of cost initiatives and network enhancements we’ve made. And that's why we're seeing three quarters in a row now where an aggregate, our comp in benefits, are increasing at a slower rate than our package volume.

Our next question will come from the line of Kevin Sterling of BB&T Capital Markets. Kevin Sterling - BB&T Capital Markets: You've talking a lot about your International growth. And as you talk to your customers, do you think we're seeing a modal shift from ocean to air and how they think about managing their supply chain?

Yes, there’s a little bit of that going on right now. I think right now, there is somewhat of an ocean squeeze. Containers are hard to get. And that, combined with the fact that there were a number of shippers last year that really got stretched late into the holiday season, that's why there was such an explosion in the forwarding activities. So we are seeing, I think, shippers plan ahead a little more, perhaps plan to use a little more air, clearly. The Air Forwarding and our Air Express businesses are growing very rapidly. So in general, my guess is there will be a little heavier concentration of air this year for the holidays. Kevin Sterling - BB&T Capital Markets: You talked about your customers trading up, and maybe it's along the same lines. Do you think this is a function of your customers really managing lean inventories and trying to manage their inventory situation?

Yes, I think we're getting back more to a normal environment. It's great to run very tight. It's great to use slower and lower cost modes, and during the midst of this recession, that was the priority. Customers had to reduce their balance sheet. They had to reduce their cost. Now that things are a little more stable, shippers are looking back at, “How do I optimize? How do I make sure I’ve got availability for goods without over-investing in inventory?” And so that's where the more rapid services come in. So we're pleased to see that.

And clearly [ph] we talked earlier about inventory-to-sales ratios, and frankly, they were pretty low going into the recession. They’re a lot lower now than they were when we went into the recession. So I think that will drive some of the trade-up.

Our next question comes from the line of Ms. Helane Becker of Dahlman Rose.

So I appreciate all of the responses that you've given and I kind of think most of my questions have been answered. Just one clarification: Do you think that you're seeing somewhat of an uneven recovery with industrial businesses growing and consumer-related businesses maybe growing not as fast? Or consumers slowing down, but corporations growing faster?

I think the feeling is there’s pretty good consensus that this will be a business-led recovery. I think that a pleasant surprise was probably in the first quarter on retail sales and the strength of the consumer. And in fact, the consumer’s probably doing a little better than any of us thought a year ago at this time. But I think this is a business-led recovery. And you'll see industrial production continue to grow faster than GDP overall, and that’s driven up through the manufacturing side.

Our next question will come from the line of Mr. Art Hatfield of Morgan Keegan. Arthur Hatfield - Morgan Keegan & Company, Inc.: I want to get your commentary on if you're seeing anything unusual in any of the markets from any competitors that you have? Anybody who's introduced new services, if they're being aggressive about how they're trying to maybe take some market share?

No, Art. I think the market has been very rational. I think internationally, we've seen stable pricing. I think all players had some challenges and they've been very rational. Domestically, the market is sluggish, I guess. The demand is not robust, but the pricing is rational. Clearly, the Post Office is wrestling with its financial issues. On the service side, FedEx has been expanding their global network. They're making a big deal of the 777 as its game-changer. I mean, that makes great press, but frankly, we're very comfortable with our 747-400 assets. So we can pretty much to go toe-to-toe. The 747 costs 40% to 50% less than a 777 from a capital perspective. And frankly, anything less than 4,500 miles, it has a substantial payload advantage and it pretty much matches the 777 for, say, Asia to Europe. But it's good. I mean, we want to compete on service and speed and quality. And so that's what makes the market a healthy one. So we see competition continuing normally. We're continuing to reinvest with technology, capacity and merging all of our capabilities. And that's one of the big stories where I think we’re really succeeding these days. It’s all about the pieces of the UPS puzzle coming together. So all in all, we think the competitive environment is very positive. All providers are competing like crazy, but also being rational. And we don't expect robust economic recovery, and that's what we try to make clear, both in our prepared comments and our press release. But we think even in this modest environment, we can prosper and continue to raise profits substantially.

Probably the one area in the world that we're still paying attention to is China. And there's a lot of things going on in China. For example, the Chinese government is talking about consolidating the three airlines' cargo operations over there. And while that wouldn’t have much impact on the Small Package side of things, it could impact our Freight Forwarding business where we use those airlines. So those are things that are kind of in the process of change, so we'll pay attention to.

Our next question will come from the line of Mr. Justin Yagerman of Deutsche Bank.

I wanted to ask about operating leverage. Obviously, a very strong quarter for operating leverage. You guys are showing more than you have in the past. Now, I would imagine things like trading up in products and some of the re-pricing of DHL business is helping that out. Can you talk a little bit to where we are in terms of those events in particular, and then also kind of where you think we are in terms of you guys being able to display this kind of operating leverage on a consistent basis in terms of costs coming back in the cycle?

Clearly, the environment stabilizing is a great help. I think we did numerous initiatives and we talked about us being able to keep the majority of those cost savings. We meant it, and I think you're seeing it. So we've been very pleased with the direct productivity with the network changes. Having the highly automated hub with tremendous capacity and Worldport continues to allow us to take aircraft out of the sky and replace smaller aircraft with larger aircraft. So we're seeing the network economies there. I talked a little bit about our assets around the globe. The 747-400 is a very capital-efficient asset that meets customer needs. I think one of the areas where we've not seen the operating leverage as much is in the wage arena. Clearly, with us continuing to improve productivity, we've not had a need to add many employees. So we’ve still not yet seen the latent benefits of the labor contract, whereas we began to grow and add employees. We will see lower average wage rates ripple through the network. So that's something we're looking forward to hopefully as the U.S. recovery becomes more robust. That should give us another leg in this operating leverage.

I guess not to harp on this, but following up on Bill Greene's question on the share repurchases. You guys have a lot of cash. Your balance sheet isn't over-levered. What's really the danger here for you guys to push ahead? Because it feels like, and maybe I'm getting ahead of myself, but waiting, you're obviously going to end up buying back the stock at a higher price. And I think shareholders would rather see you guys buying now rather than later. What's the downside consequence for just going ahead? If S&P were to downgrade you guys, what's the impact to the company?

I think there’s very little likelihood of S&P downgrading us given the incredible momentum we've got. But we did basically tell them our intentions; to get those financial ratios robust. We think, given the expectation of our current momentum being far beyond even where we thought we were at the beginning of the year, that there's a good possibility that we will talk with them and have a little better view. So we're not totally beholding to them, but we also don't like the negative outlook. We don't think it's appropriate and we intended to demonstrate the financial capacity before we got more aggressive. But we committed five years ago to a policy of returning basically 100% of net income to shareowners, either in the form of share repurchase or dividends. I think Scott and I remain committed to that program. We do think that the stock is a bargain right now and hopefully we these results, we’ll get that one little minor cloud cleared up and then we'll find what the best way to redistribute to shareowners is.

We have a question from the line of Mr. David Ross of Stifel Nicolaus. David Ross - Stifel, Nicolaus & Co., Inc.: A first question on the purchase transportation. The costs were up significantly year-over-year in the quarter. I know a decent amount of that is fuel; some is volume increases. Can you just kind of talk about that line [indiscernible] a little bit? How much might be volume versus fuel versus network, adjustments where you bought purchase transportation instead of adding UPS capacity?

Yes, that line has a lot of moving parts now, especially as we’ve become a larger and larger forwarder. So the single biggest impact is the substantial growth we had in our Forwarding unit. Tonnage was up about 30% in the quarter. And on top of that, rates are dramatically higher than they were last year. So the lion's share of that increase would be directly related to the Forwarding and the increased rates. Following that, certainly within our International business, we have a substantial amount of purchase transportation, either for agents or transportation. So with the dramatic 20% unit growth in International, that's also up. And then the smaller part domestically would be fuel and there’s also [indiscernible] in there. So it’s really a relation of the Forwarding and International growth, both of which were in excess of 20%. David Ross - Stifel, Nicolaus & Co., Inc.: In fact, congratulations on being named in the President’s Export Council. It’s good to hear that a business leader is actually on that Council.

It’s very important, I think. We talked earlier about the need in the U.S. to get small business people to export. And I think the ability to help get out and train some of them on the ease of exporting. And we’ve identified 7,000 or 8,000 customers right now that export to just one country, and we're going to try to get them to go to at least two countries, and we think that's very possible. So I think it's very important for the country to get employment going again and to get small business exporting. We talked about 96% of the consumers outside the U.S. They need to understand that. David Ross - Stifel, Nicolaus & Co., Inc.: I understand. But do you think it's possible to double exports over the next five years, given current capacity constraints and trade policies?

Yes, I think that it will all go hand-in-hand. I guess it's stretched gold, but I think that we are going to have to get more accommodative trade policies. It starts with free trade agreements with Korea, Colombia and Panama, and that's certainly part of what we're trying to work on on the Council.

And I think a little closer to home, UPS is working like crazy to lowering the barriers to doing trade globally. That's why things like our paperless invoice, import control, all of that stuff, just trying to automate things that used to be very confusing for small and midsize customers. So that's why we're so obsessed with technology and the ease of use. If we make it easy and the government facilitates it, then we think there's a lot of latent capabilities in U.S. small business to grow.

We have a question from the line of Mr. John Barnes of RBC Capital Markets.

Just a question back on the Domestic volume growth. If we are in for a more protracted level of modest growth, this kind of 1%, 1.5%, maybe 2% GDP for a protracted period of time, the reorganization that you just completed in the Domestic Package business, is that enough cost reduction to sustain the margins where they were this quarter through a protracted period of maybe slower growth in the Domestic business?

I think, John, it's our intention to increase margins. So no, absolutely. We've aligned ourselves in a number of ways to be able to continue to get margins growing and back, hopefully over time, to where they were in our peaks. So from a peer cost perspective, absolutely. And I think there's also strategic positioning in our restructuring, maybe that Scott can talk about a bit.

I think part of the restructuring was all about going to the customer and getting local control over operations and our marketing. And I think that we're just getting to the beginning of that process. We’re taking marketing to all the districts right now. It used to be done out of Corporate. Every one of our markets are somewhat different. And I think the fact that we have this expertise now, looking for different segments, looking at micro marketing, is going to help our business. And it’s not going to do it overnight. We're going to see more benefit in the second half of the year than we saw in the first half of the year. We'll see more benefit in 2011 than we saw in 2010. So I think it’s a combination. Sure, we’re going to save some costs, but I think the fact that we're giving more autonomy to our local operations, more decision-making to our local operations, will help us run a better business.

The one thing I was a little bit surprised about in your answers in terms of the use of cash and the return of it, there wasn’t a lot of discussion there on maybe some of your growth initiatives or your acquisition outlook. Could you elaborate a little bit on that in terms of where that fits in the whole scheme of use of cash on a go-forward basis?

Clearly, John, we're going to be looking at opportunities [indiscernible] business. And I said many times before, our focal points are really going to be on the International Package business, starting with Asia and then probably Central and Eastern Europe. Clearly there are opportunities out there that fit our needs, that add to our strengths as far as capabilities or lanes that we need to strengthen. We’ll take advantage of that. So that never is far from our couriers just using cash [ph]. We're always looking at the right acquisitions. In the Freight Forwarding/Logistics world, again, if we find areas that will fortify trade lanes or add capabilities and logistics, we'll take a look at those also. So it’s a combination certainly of acquisitions, investing into the business and distributing cash to shareowners.

John, our outlook though for cash flow is very positive for the next couple of years, with the completion of our Worldport air hub with the, really, replenishment and replacement of all the older aircraft in our fleet. Our capital needs for the next few years are going to be significantly below the trend, even with strong growth. So we are just in a good position of having a lot of choices right now with what we do with discretionary cash. And certainly, growth would be the top priority.

Our next question will come from the line of Mr. Chris Ceraso of Crédit Suisse. Christopher Ceraso - Crédit Suisse AG: A couple of items. In your view, is any of the strength that you're seeing, particularly in the International volumes, reflective of maybe shippers looking to get ahead of the curve a little bit with regard to peak season because they’re worried about capacity availability?

Yes, Chris, I do think that there may be some of that. And that was part of my intention in my comments talking about the ocean squeeze and some of that. I think a number of our customers, and this is direct from our sales customers, did feel exposed last peak season and got in a jam. That’s why there was such chaos trying to get goods out of Asia in late November and December. And so there's a little bit of that “not this time” mentality. So we do think that people are pushing stuff through a little earlier. And as they see the constraints on the ocean side, then it may make for an earlier air peak season also. Nathan Brochmann - William Blair & Company L.L.C.: Do you think enough of that is happening that it will alter somewhat the normal seasonality as we go through the balance of the year?

I don't know. I think right now, it’s way too early to afford to be impacting air freight, but air freight continues to be strong. So it will be an interesting year, I think, as we come back. Assuming the economy stays reasonably strong, then it could be a fairly interesting time as there is some backlog, I think, on the ocean side already. The slow steaming, in effect, takes substantial capacity out. So a lot of companies that wouldn't normally think about using air freight earlier in the holiday season have been talking about that. Christopher Ceraso - Crédit Suisse AG: And then a follow-up. To the extent you're having high level discussions with customers about export and their strategic outlook, do you get any sense from customers that they are waiting for more clarity either on the policy front or the legislative front to make investments or to grow their businesses? Are people kind of sitting on their hands waiting for the government to kind of settle out?

I think, clearly, policy uncertainty is one of the worst things for a recovery. And I think that the sooner we get some of these issues resolved, whether it be energy, we’ve got healthcare I guess somewhat resolved at this point in time, the sooner small businesses will get to spend their money again and bring in hired employees. So there's no doubt that policy uncertainty is an issue out there. We need to resolve that to get this recovery going full-steam.

And our last question in queue will come from the line of Mr. Chris Combe of Exane.

I had a follow-up to Robin's question on European, both international, domestic and export yields. You gave some color x Turkey. Could you also give us some sense of how much of an FX effect you had, given the quite a significant impact from Q1 and some euro-dollar development, and if anything worked against your favor a bit?

Yes. Actually, due to the impact of our hedging, the currency was actually not a huge impact. But we do show currency-adjusted yields. Export yields do show increases. Without currency, it would be just a little bit lower. So no, we're seeing very good strength on our export side, good pricing power, and also the increased weight. The other big thing that's happened, and we saw a little bit of a shift, the Transcontinental, the Europe-Asia to U.S., really was stronger than the intraregional shipments. And typically, the yields on those long-distance flights are much higher. So all in all, very strong pricing and we're very comfortable that those trends will continue. David Campbell - Thompson Davis & Co: And just one quick follow-up. In terms of the trade-up effect that you referred to, are you seeing any signs of that within the European market?

Yes, we are actually. In Europe, we offer this very integrated range of services from standard to express with no time commitment or afternoon commitments and early morning. And we are seeing a little bit of a shift across all of those up, just as the economy heats up. And frankly, as we work with customers in Europe to help them re-align their supply chains, you reduce your warehouses and you use a little more speed in your transportation network. So that trend has also helped the yield.

That concludes our Q&A session today. I will now turn the program back over to Mr. Andy Dolny.

Yes, I'm going to turn it over to Scott for final comments.

xxx Thanks, Andy. By any measure, UPS produced a great quarter. While we've made good progress across all the business units, we still have a lot more to accomplish. The UPSs around the world will continue to work extremely hard to help our customers compete in the growing global marketplace. And as a result, we’re very excited about the outlook for UPS' future. Thanks so much for joining us today, and we'll see you next quarter.

Ladies and gentlemen, that does conclude our conference call, the UPS Second Quarter Earning Call. On behalf of today's panel, I'd like to thank you for your participation.