Good morning. My name is Steven and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the UPS Investor Relations Second Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question-and-answer period. It is now my pleasure to turn the floor over to your host, Mr. Scott Childress, Investor Relations Officer. Sir, the floor is yours.

Good morning, and welcome to the UPS second quarter 2017 earnings call. Joining me today are David Abney, our CEO; Richard Peretz, our CFO; along with International President, Jim Barber; President of U.S. Operations, Myron Gray; and Chief Commercial Officer, Alan Gershenhorn. Before we begin, I want to review the Safe Harbor language. Some of the comments we'll make today are forward-looking statements, and address our expectation for the future performance or results of operation of our company. These statements are subject to risk and uncertainties, which are described in detail in our 2016 Form 10-K and 2017 10-Qs. These reports are available on the UPS Investor Relations website and from the Securities and Exchange Commission. The webcast of today's call, along with a reconciliation of GAAP and non-GAAP financial measures, are available on the UPS Investor Relations website. Webcast users can submit live questions during today's call. We will attempt to answer questions of a long-term and strategic nature. Callers are asked to submit only one question so that we may allow as many as possible to participate. Now I will turn the call over to David.

Thanks, Scott, and good morning, everyone. Earlier this year we stepped up our pace of investment to accelerate the most sweeping transformation of our network in decades. We are investing heavily in new capacity and connected technology to capture the tremendous e-commerce and international growth opportunities we see. We are creating the next generation UPS smart, global, logistics network, to fuel long-term, profitable growth and enhanced share-owner value. Our performance in the first half of the year strengthens our confidence that we are on the right track. UPS delivered good results in the second quarter, driven by strong revenue and high margins in all three of our reporting segments. We are pleased with this progress. Our U.S. segment delivered more than 13% operating profit growth as daily shipments accelerated and package yields improved. The International segment continues to produce outstanding results, including robust growth and high margins, even in the face of currency headwinds. And the Supply Chain & Freight group is producing more favorable results as they reposition the business to achieve greater profitability as market conditions improve. As we look forward to the rest of this year, growth in the global economy is expected to increase moderately as the year progresses and UPS is well positioned to reap the benefits. The latest U.S. GDP forecast for the balance of the year remains unchanged. Industrial production in retail are still growing, although at a slower pace than originally projected. Online purchases, as a percent of retail, grew once again in the latest forecast. Growth rates in Europe are expected to continue to be resilient, with most economies rising. And in Asia, the outlook for China has improved, with growth in that market now exceeding the previous forecast. The export market remains solid and we are aggressively positioning UPS products…

Thanks, David, and good morning, everyone. Earlier this year, we laid out our 2017 full year plans, as well as our three-year target. At the midpoint of the year, the business is performing as we expected and we are pleased with our progress. Looking closely at the second quarter, total revenue increased 7.7%. Adjusting for currency, top line growth was nearly 9%. The revenue was balanced across all segments with shipment growth throughout the product portfolio. Earnings per share were $1.58, up almost 11% over last year with good, core performance within the segments. In addition, there were several items that positively contributed to the quarter. Most of these were expected. First, net fuel year-over-year was a benefit. In 2016, fuel prices accelerated through the quarter from April through June. At the time, we had a two-month fuel surcharge revenue delay and were unable to offset the increase in fuel prices. In early February, we adopted a two-week revenue lag. In addition, there were other fuel policy changes that increased the overall revenue-to-expense coverage ratio. Another positive contribution occurs as a result of lower workers' compensation cost in the second quarter. We've gone to quarterly, rather than semi-annual, outside independent studies to refine our estimates of our workers' compensation liability. Finally, it was a one-time benefit that the Supply Chain & Freight segment received this quarter. Together these three contributed approximately $0.10 per share. The majority of the benefit came from fuel and workers' compensation that we had anticipated. Now, let's turn to the details of each segment. In the U.S., revenue increased more than 8% due to several factors; volume growth, Easter in the second quarter, and higher fuel surcharges, which added about 120 basis points. Total shipments increased almost 5% with growth accelerating across the products. Deferred Air…

As a reminder, ladies and gentlemen, please ask only one question so that we may accommodate more callers. Feel free to get back into the queue and we will take a second question, time permitting. We will now take our first question from the line of Mr. Tom Wadewitz of UBS. Please go ahead.

Yeah. Great. Thank you, and good morning. I wanted to ask on the – you showed strength, I guess, across the board in volumes; in particular, international export was very good. I wanted to see if you could comment on the drivers of that, and also perhaps the competitive environment. It appears there's some issues with TNT and the cyberattack and so forth. And I guess that didn't affect you in the quarter, but is that something that could potentially be a meaningful opportunity that would boost your export even further? Thank you.

Okay. Thanks for the question. This is David. And I'm going to start with the first part about the cyberattack and how it may have affected volume, and – because there were a lot of parts to that question. But on that, first thing I wanted to say is we obviously don't wish cyberattacks on any company. I mean, these things are criminal acts and I know that we all take them seriously. And from a UPS standpoint, we are regularly investing in updating our technologies to protect, not only our customers, but our employee and company data and also, of course, our service levels because we know how important that can be. So, as far as how that or other things have affected our volume, Jim, I'll turn it over to you.

Okay. Thanks, David. Tom, I guess it's a pretty wide question, but I guess I'll come back to openly the growth drivers as we talked about last quarter. It's very balanced, but this last quarter Europe did have our highest growth rate underpinning the 12% export you referenced. On the back of David's comments, straight up, yes, we are seeing more business recently in Europe, but I also would point you to a couple of key factors here. First of all, no matter what's going on in any marketplace, customers have choice. And the choices they have in Europe, because of this unfortunate situation, are between us and many other competitors. I think the way we're looking at this is that through the last couple years we've talked about our investments in the network and new products, like our recently announced dangerous goods capabilities, continued expansion of the network, and in those cases, those seem to certainly be resonating and we – they are choosing UPS. Our job is to serve them going forward and continue to invest in the network as we go. So – and, certainly, I do want to reinforce what David said. This is not a situation that we would certainly wish on anyone and we know we have a job to do and serve whatever customers are on our network. So appreciate that.

Okay. Great. Thank you.

Our next question will come from the line of David Vernon, Bernstein. Please go ahead. J. David Scott Vernon - Sanford C. Bernstein & Co. LLC: Hi. Good morning. Richard, can you help us understand where the $0.10 benefit you guys called out sits across the operating segments? And I just want to make sure – or help there – if you could even maybe help me understand, if the underlying profit growth in the domestic segment has kind of come back into the positive territory, if you were to adjust for some of this noise, whether it's the $35 million or whatever portion of the $0.10 you want to put into the domestic segment?

Sure. Actually, a large portion of it is in domestic and there also is in international. If you look back to 2016, David, what you would have seen is that the fuel prices were increasing between 35% and 40% during the quarter. You recall we were still a two-month lag. So, for example, while fuel price per barrel was somewhere in the mid-$40s on average for the second quarter, we were still using February's revenue to create surcharge, and that was $31 a barrel at the time. So it's really about a year-over-year and, actually, I went back and looked and we talked about last year on this same second quarter call that we had some headwinds because of that fuel change. Fortunately, we'd made that adjustment and what happened last year, cost actually kind of got pretty tight the rest of the year. And so, we expected in our plans that we would see a benefit because of the drag last year on that. On the workers' comp, what's really happened is because we're now doing quarterly studies instead of just twice a year, we've moved some of the benefit that we traditionally see in the third quarter into second quarter. And so, generally speaking, what we're trying to do is marry up with our actual experience in a more meaningful way on a quarter-by-quarter basis. And so we made that method up, that change, because we thought that was more prudent and also to understand how the business was really going. When you look at the second half of the year, we expect to have a strong second half of the year, good results. We talked about a few of the items that you have to take into consideration, but we feel like when you look at all the data that we've seen, we feel confident that the range that we've given you is something that we're going to deliver when you get to the second half. Thank you. J. David Scott Vernon - Sanford C. Bernstein & Co. LLC: But if you think about that $0.10, is it like 70/30 domestic/international, like is there any kind of rough line on that?

I would say between 70/30 and 80/20, somewhere in that range. J. David Scott Vernon - Sanford C. Bernstein & Co. LLC: Somewhere in that range. Thanks very much.

We're going to take an international or an online question. And this question comes from Jack Atkins. Jack asks, you know that the double-digit revenue growth at Coyote, is Coyote continuing to hit your expectations for $200 million of increment EBITDA by the end of this year?

Hey. This is Alan. I'm going to take that question. As you know, we were continuing to see strong year-over-year growth. We are growing market share with the service offering that we have in place. The service levels remain consistently high and we're continuing to innovate with technological solutions. The GL market is tightening, but the asset-light model is providing flexibility in the up-and-down cycles. We do have pressure on the contractual committed freight, but we also see opportunities and upside with the backup in spot markets. The key here is that the connectivity remains a real strength for us, both from a customer value creation and a synergy perspective. Our synergies are on track. We expect to get about $100 million for 2017 and that's coming in the form of procurement, back haul, asset utilization, cross-selling, and organizational synergies. And then, last, I'll just say that the cross selling is really producing several great wins this year and we are targeting the rich opportunities in the UPS customer base, specifically on the small/medium business side for greater yields. Thanks for the question.

We have a question from Scott Schneeberger of Oppenheimer. Please go ahead. Scott Schneeberger - Oppenheimer & Co., Inc.: Thanks. Good morning. It sounds like, clearly, a lot of momentum in B2C domestically. I'm curious with regard to B2B, what kind of trends did you see second quarter, first half? And do you anticipate, assuming that that's been picking up, that perpetuating into the second half and any color you can provide particularly with regard to the retail? Thanks.

Yes. So, this is Alan. I'll take that question. As we noted, the B2B in the second quarter expanded slightly versus last year. So we saw low-single digit growth there and we saw improvement across many industry segments. From a quarter-over-quarter basis, we are back in positive territory so we did see a good sequential jump off the negative results the last couple of quarters. Our e-commerce customers are driving both B2C and B2B shipments higher. Returns growth continues to be strong. And then on the Air side, you saw our Air growth was really the story this quarter with Next Day Air growing at 6.4% and Deferred growing at 11%. So we are seeing good growth there also. Thanks for the question.

Chris Wetherbee, Citigroup. Please go ahead.

Hey. Great. Thanks for taking the call. I guess I want to talk a little about the second half of the year. So, as I'm listening to sort of the outlook and guidance that you have there, the third quarter is flat I think on an EPS basis. Midpoint suggests a little bit down in the fourth quarter but, I know you have tax dynamics playing out there but with the peak season surcharges and some of the momentum from a top-line perspective, I guess, I just would have thought it would have been a little bit higher than that. So I was just wondering if you could help us a little bit to sort of understand maybe top line dynamics as well as some of the cost assumptions embedded particularly around the peak season in that second half outlook?

Sure, this is Richard and I think that to start with, Chris, what you said is right. When you look at the first half of the year, we're right on plan. The U.S. business is adapting well. International continues to, as Jim mentioned, to have good growth, and supply chain is recovering. As we looked, though, at the current data, what we also noticed is although we are seeing some positive trends in many of the different industry types in B2B, we're a little challenged because the number of stores that are closing is having an impact on growth in the B2B. And so the forecast for B2B, if you go back earlier in the year to today, is not quite as strong because of retail sales and also because industrial production forecasts were higher even three months ago to where they are today. So we took that information and we looked at that against also some of the items that we called out that won't repeat in the second half of the year and we put it all together and we just didn't see enough new data that would suggest at this time we should adjust guidance. Obviously, as in the past, if more information comes in and it's appropriate to suggest a change, we would communicate it appropriately. But, at this point, based on – we're adjusting to how the volume and the customer demand is changing and we feel comfortable with where we're at.

Richard did a good job explaining the puts and takes for the fourth quarter. And I just want to make it very clear, as Richard and our team knows, we expect to have a very good fourth-quarter from a service standpoint and we expect to have good financial results. And we have been working on that throughout the year. So a lot of confidence there. Okay. Next question, please.

We're going to take an online question. We've got a few questions regarding one of the joint ventures that we're recently forming. So the question is, can you speak about the recent announcement, the joint venture with SF and when do you expect the transaction to close?

So, this is Jim. I'll pick it up. A couple of things to note here. I start with some comments David made in his opening talk about this term of partnerships. When we announced our emerging market strategy a couple of years ago, we firmly founded pieces of that on expanded partnerships across the globe. This relationship with SF Express in China really does fit firmly into that. If you know much about the company, its headquarters are founded in the same province that we have our Air hub in Southern China in Guangdong. They have been in business since 1993. Arguably, they're the domestic leader in the B2B and B2C space. They combine with our brand and our International export capabilities in China and it was one of those markets that we all have to evaluate and make strategic moves. We're super excited about it. We are waiting for the final regulatory approvals to come through but when it does, we believe it opens up segments of the market that we are better off to partner with SF and the leadership than go it alone and hence the JV announcement and we look forward to the regulatory approval and then talking more about that in the quarters and years to come.

We have a question from the line of Ken Hoexter, Merrill Lynch. Please go ahead.

Great. Good morning. Richard, that was great insight on the outlook for the volume side. Maybe you could talk a little bit more about pricing. We saw a big ramp in the ground pricing and maybe you could talk a bit about the surcharges coming up for peak season. Is that kind of automatic for every customer? Are there still contract customers you have to go renegotiate with? Maybe you can just talk about that given the ramp up we're seeing on the pricing as we head into the back half of the year.

As bad as Richard wants to answer that question, I think we're going to let Alan do it because that's really more Alan's focus area. So, Alan?

Thanks, David. Yes, as you noted, the base pricing did come in at the higher end of our 2% to 3% range. That both happened in U.S. and International, when you look at International currency neutral. So certainly the GRI, the Dim weight, the additional handling and then our ongoing focus on contract management is paying off. Specifically, to peak, as you know, the peak season surcharge is really designed to compensate for the additional cost that we incur during peak with the volume increases, the temporary capacity enhancements that we need to meet the service levels that David talked about a bit earlier. And while these rate increases, even for a short time, are rarely welcome, our customers really understand and appreciate the value of our network, what we do to provide the service and the capacity for them at peak and year around as well as the cost of doubling of the network. The peak surcharge just – a few details here. The surcharge is designed to hit the most impacted weeks where we surge in both residential and large packages. And so, for Ground, it's three weeks of the five weeks of peak and for Air, it's only one week, the last week, and then for large package it's five. And our expectations are to have high compliance with the peak season surcharge.

Great. Thank you. Just on the last question, is it on – do you have to renegotiate with each contract or is this something you're allowed to by contract add-ins?

Yeah. This is a published surcharge that affects the tariff. Thanks.

Thank you very much.

Ben Hartford, Robert W. Baird. Please go ahead. Ben J. Hartford - Robert W. Baird & Co., Inc.: Hey, good morning, guys. A question for Jim. Jim, you touched on this earlier sort of the International Air Freight capacity dynamics. I'm curious where you think the industry is in kind of in the context of the broader cycle. We've had several years of excess capacity in that globally on the Air Freight side. It seems as though it's tightened up. Load factors have improved. There are some anecdotes of some forwarders putting charter capacity into the market as well. So where do you think we are cyclically as it relates to industry Air Freight supply/demand? Has that helped International parcel yields at all and what are your second half peak expectations from an Air Freight point of view? Thanks.

Let me focus on the first question, I guess, on the capacity because there were a couple of them in there certainly. I think we're in a very unique position right now. It started about three quarters ago when some of the air capacity was taken out of the network. A lot of it came out of Shanghai, but certainly it moved south into Southern China and into Hong Kong. Usually, at this time of the year, you see a slack time in the Air Freight market. In fact, we haven't seen a slack. We've seen demand continue to roar. That's being affected in the buy-sell spreads and we're managing through that like everyone is in the market. The capacity issues as well are over on the express side of the business. The demand is high. David referenced some of that as well with the economy. So the Chinese engine over there is certainly going. You know, we've got some 747-8s on order. They're coming soon. They can't get here soon enough because our customers continue to choose the products and services. But back to the Air Freight, it is very unique. I think the next couple quarters leading up to peak will be very different from potentially some of the past. We're here very early and we've got to manage through that and then, of course, you've got the other options below in the ocean freight situation as well. So it is unique market and I believe we are managing through it very well. You can see that in some of the results and we look forward to continuing the ability to adapt to conditions as they come at us. So thanks for the question.

Jim mentioned those additional 747-8s and they will be on the truck routes, especially going from Asia into the U.S. And then next year, of course, we have additional aircraft 76s and some more Dash 8s and, again, our timing couldn't have been any better. So it's going to fit right into the needs of our customers. Okay?

We're going to online question. This question comes in. Can you please tell us how the news of the pension changes that you've announced will affect your go-forward long-term basis and how it changes your view of retirement benefits?

Sir, and I'll take that. This is Richard. I think the first thing that I want to say is that we spent a lot of time, actually several years, evaluating different options to look at how do we manage the liability, remain competitive in the market from a benefit standpoint, and as we announced just over a month ago, we're moving to a pay-as-you-go 401k plan effective January of 2023. It will change our risk profile. It will allow us to have more predictable and sustainable costs. It does reduce our future liabilities on the current balance sheet. And we'll also lower our exposure to the discount rates. As discount rates change, we see both expense change on pension as well as the liability side, as well as the change that PBGC has made with increasing costs that we're having to put into the plan, but it doesn't go to the employees. For 2017, there is no change to the guidance because we have spent a few years on this and we knew we were making this announcement in June. There is no additional discretionary contributions to pension, and the reason there isn't is because we made them in the first quarter, as I talked about on the last call. That was because of the PBGC premiums and taking advantage. Now, upon announcement, we did have to remeasure the liabilities, and what we saw was discount rates were down about 32 basis points from the end of the year to the end of June. At the same time, because the equity markets have been stronger, we did see some offset from the higher return. Finally, when I put all of this together, it's really hard to talk about what it's going to do in future years because until you know what discount rates are doing, you don't really have an impact on your financials five years out. But what I can tell you is we spent a lot of time trying to balance what is right for our employees – most of them spend their careers at UPS, as well as managing the risk profile and the liabilities for UPS as a whole. Thank you.

Our next question will be from Brian Ossenbeck of JPMorgan. Please go ahead.

Hi. Good morning, and thanks for taking my question. So, as you mentioned, since November of last year, the company has announced a lot of facility expansions totaling over $1.5 billion in the U.S., additions and expansions rather. So if you could just give us a sense what the total investment required for the hub modernization program is? And how that fits into the context of your Capital Expenditure run rate this year and perhaps into next year?

So, actually, a lot of these buildings are over multiple periods. And what we talked about in the investor conference is over the next three to five years, there would be somewhere around – between 28 million square feet that and 35 million square feet that would go in over the three to five-year period. And then talk David had this morning, he talked about we've announced almost 4.5 million square feet in 2017. Over the last year and a half, we've actually announced about 7.5 million square feet that's currently under construction, and just about 5.5 million square feet will open in 2018. Overall, it is in the guidance of the increase to 6% to 7% per CapEx of revenue, and that's really because you saw now for the last four quarters in the U.S., we've been having close to 5% or greater revenue growth. We need these buildings in order to continue to grow. These growth rates are higher than our historical average and we talked in the investor conference about the importance of growth and, at the same time, with our high return on invested capital, these assets will continue to allow us to nurture not only the ROIC, but also grow the top line and bottom line. So we're on a path for the next three to five years. It's something we laid out at the investor conference and we are looking forward to that 5.5 million square feet opening next year.

Okay. Thank you.

And Scott Group of Wolfe Research. Please go ahead.

Hey. Thanks. Morning, guys. So, Richard, wanted to just ask you on currency, how come no change in the currency headwinds just given the recent move in the dollar? And then, if there is no impact or no change this year, maybe, I know it is early, but can you give a preliminary view on what kind of potential tailwind we could see from currency next year? Thank you.

Sure. So actually, just to step back for a moment, in 2017, we went to a – we were, historically, before 2017, used a collar approach and it was a stock market transaction. What we did in 2017 is to do a transition because starting in 2018 we'll go to a dollar cost averaging where we're spreading it over a 36-month period. What that means is the year-over-year comparisons won't have big variations. But what it means for 2017 is that we do have a collar. The increase over the last, probably few weeks, where the dollar has lost between 6% and 8% of the value is inside the collar. So for the hedge currencies, what that means is it's going to be right where we expected it to be, and for the unhedged, you'll have a slight difference in the overall. Now, if you recall, we called out during the first quarter, we had about $119 million drag from currency. This quarter, $114 million. Until the quarter closes, and each month closes, I won't know what the drag is and how much it changes because the most recent changes will impact July, and then whatever happens is going into August and September. But because we give you that new schedule in our web schedules, that will allow you to see. And as it comes down, we'll obviously communicate that, but right now, we're sitting at about $117 million this morning. And that's right in the collar range that we had already set out. But with the new program, the most important part is we won't see this year after year starting in 2018. And it's also important to remember when you look at the International business, we have an 18.4% margin even with the drag from currency, so we continue to have industry-leading margins because all the work Jim and his team is doing in growing the business and growing exports.

So just so I'm clear, don't count on a currency tailwind next year?

That's correct. And when we evolve to this new weighted average, we actually had explained that by doing that we would remove – that because what happens is for basically two-thirds of the comparison period, it's the same currency year-over-year. It's only the head and the tail that will be different from the timing standpoint.

Thank you.

We have a question from the line of Kevin Sterling, Seaport Global Securities. Please go ahead.

Thank you. Good morning, gentlemen. I noticed there's been a lot of talk about the International Air export market, but maybe I could drill down a little bit in your Next Day Air growth. That was very nice at 6.4%, and we've not seen that type of growth for the past couple of years in Next Day Air because I can remember seeing the shift past couple of years from premium products to Deferred products. But now it appears that Next Day Air is back in vogue. Why is this? Is it the Amazon effect, with supply chains just speeding up and everybody looking to catch up? And do you think we will continue to see is this growth in Next Day Air?

Yes. So, this is Alan. I'll take that. Yes, so as you know, we saw premium Next Day Air revenue grew at over 7% and Deferred grew at about 13.5%. There's a couple of things going on there. First, our customers are really responding and enjoying our continual expansion of the Next Day Air and Next Day Air's early service to more postal codes to anybody else out there in the market. And so our market leadership in Express and premium Next Day Air supports our healthcare, high-tech, and professional services segment customers, and strategies. In fact, now, and for the last few quarters, UPS is the air market volume leader. On the other hand, the Next Day Saver, the UPS Ground, Deferred Air are focused to support our e-commerce and retail customers, and so when you look at our air products and how we have them positioned, along with the integrated portfolio with the ground, we have the industry segments that need that premium service identified and we are making some real gains there. And then we're also addressing the opportunity for the Next Day and Deferred Air opportunities for the e-commerce type of customers. So thanks for the question.

Thank you.

We're going to take an online question. This comes from Ravi Shanker of Morgan Stanley. Can you talk about how Marken has evolved within UPS? How do you see the opportunity to grow supply chain and fulfillment with the growth of e-commerce and omni-channel?

Yes. This is Alan. I'll take the first part on Marken and this really kind of falls back in with the last question in terms of the premium air service, because Marken is the premium service when it comes to being able to handle clinical trials. If you folks remember back in February at the last investor conference, we discussed healthcare being one of the three growth verticals that we're targeting and it represents about $70 billion in global opportunity. And certainly, the acquisition of Marken plays right into that. They're the market leader in clinical trials and we couldn't be happier. They are enabling our healthcare vertical to immediately deepen and expand our global clinical trials logistics footprint. They're retaining independent operating status. We're seeing excellent growth in connectivity already. UPS and Marken together now are the only clinical trial logistics provider with the hybrid model that's leveraging UPS's world-class Express services and the other valuable parts to the UPS network like brokerage along with Marken's outstanding high service network. We see significant opportunities with cross-selling. Also some bridging over to the commercial side with hospital, labs, and CRO opportunities. So it's really working. And I'll pass it over to Jim for the second part of the question on distribution.

Yeah. Thanks. So on the distribution piece, I'd say, open with, I think we definitely keep – continue to lean into healthcare distribution. Certainly, it still is our largest segment now. Continuing in distribution, we are up to 78 facilities across the globe. We opened two new facilities in the previous quarter. So certainly that continues to be a very targeted vertical for us. Marken continues to align to that. Certainly there is a piece of their business that is inside the box as we say, but it also aligns very nicely to our emerging market strategies. It moves across the world. And the clinical trials model synergizes with many of the initiatives that we have. And of course, we also brought on some key leadership in Wes and his team. So, we like the Marken acquisition inside UPS as well as distribution.

We have a question from the line of Amit Mehrotra of Deutsche Bank. Please go ahead.

Yes. Thanks so much for taking my question. Appreciate it. So, I had a quick one just on how changes in lease accounting rules will impact the P&L and then on the CapEx just a follow-up, the current increase in investment, just trying to understand what that assumes for growth in B2C volumes. I'm not sure if you look at it this way, but just given e-commerce growth is accelerating and really accelerating off a higher base, the key question for me is, whether you think the current run rate of investment is appropriately sized for that growth or just how you think about the relationship between the two. Thanks very much.

Sure. So, I'll start with the lease accounting and tell you that we are in the process, it's a 2019 implementation of preparing all of the leases that will have to be put on to the balance sheet according to the new accounting standard. Step back for a moment though and those kind of leases for UPS, while they'll be large because we are a large company, aren't large categories. For example, we're an integrator that owns our aircraft and we own an aircraft within our company. So when you see deposits, for example, we put those into the CapEx early because that's – we are putting in the deposits before we take ownership. There are other companies around the world that don't always own their planes or they're off balance sheet so they have a different preparation than we would have. That being said, it's a tremendous effort that we are going through and at the appropriate time when it's all put together, but like I said, we have more than a year-and-a-half till we get there. In terms of the capital, if you go back to our investor conference presentations, we did talk about the growth rate and as I mentioned, the last four quarters in the U.S. have grown almost 5% or more, which is above our historical norm on revenue. And you'll see that we continue to believe that what we're doing from an investment side is helping to support a flexible network ability to do more capacity and it's all part of the smart logistics network that we're creating and so we feel very comfortable with the 7.5 million square feet that we have under construction and the announcement that somewhere between 28 million and 35 million square feet will be completed, that we're building this really for the tremendous opportunity of e-commerce and how that's moving, shopping, from physical stores to online.

Okay. That's it. Thank you very much. Appreciate it.

Allison Landry, Credit Suisse. Please go ahead. Allison M. Landry - Credit Suisse Securities (USA) LLC: Hi. Thanks for getting my question in. I guess sort of piggybacking on the last question, you've obviously talked about what you're currently seeing in B2B in relation to the brick-and-mortar closures, but if you really think longer-term about this trend and there's expectations out there for at least another 25% of retail locations to close over the next decade or possibly sooner. So, I wanted to ask how much of your B2B business is still replenishment? What do you think the impacts will be on your network as this trend accelerates and whether it might necessitate any incremental capital spending over the next few years? Thanks.

Yeah. So we are the B2B market leader in the U.S. and our B2B customer base is spread across many, many industries. The industrial manufacturing, automotive, healthcare, high-tech, professional services and then also retail. Now the – now while retail stores closing is also a drag, we're also seeing with some of our more successful retailers ship to store where they're blending through an Omnichannel way their B2B and their B2C and encouraging their customers in fact, incenting them to pick their goods up in the stores which is driving actually more small package to those particular stores than in the past as compared to other shipments like truckload and LTL. And with that I'll pass the second part of the question over to Rich.

Sure. So, if you – Allison, if you think about some of the things we laid out at the investor conference around the faster growth but also the solutions, things like that network planning tool, is really about the ability to adjust because one of the challenges in this online environment is understanding distribution patterns because they're not based on historical. Some years you have heavier buyers in one part of the country than another. So the network planning tool allows us to make the adjustments in real time. You think about what we're doing with Orion and the automation in the buildings, but when you look across the entire portfolio of CapEx, we're really building a network that's going to allow us to grow in a substantial way over the next three years to five years. And then on top of that, between synthetic density, Access Points, My Choice, all of those are about helping the transaction to be completed for the end user in a way that's convenient and gives them some choice in how they receive their package. So we feel like we've laid out a good roadmap. We feel like we're taking into account the structural shift from physical stores and we're going through the process, as I said, a moment ago, and building those buildings that we need to make this all work as online continues to grow faster. We're going to take... Allison M. Landry - Credit Suisse Securities (USA) LLC: Take it.

Sorry, Allison. Allison M. Landry - Credit Suisse Securities (USA) LLC: No, go ahead.

We're going to take an online question real quick. It's going from Brian Ossenbeck from JPMorgan. How has the initial roll out of Saturday delivery been received by shippers and UPS drivers?

Good morning. This is Myron. While we're early in our deployment, the response from our customers had been very positive. As you will recall, our Saturday operations are both pickup and delivery, which has helped to speed up time in transit and is giving our customers a great opportunity to have Saturday pickups that are delivered on Monday and has proven to be a tremendous market advantage. We deployed over 35 major metros in the quarter on the way to implementing over 4,700 cities in 2017. So, results are positive. The implementations have gone well and our employees are responding very well to this offering.

We have a question from the line of Jeff Kaufman with Aegis Capital. Please go ahead.

Thank you very much. Hi, guys. Lot of my questions have been answered at this point, so let me ask more of a detailed one. You're on track to spend almost $2 billion in share repurchase this year, yet shares outstanding haven't really moved in the last six months. Should I think of $1.8 billion to $2 billion as just an anti-dilutive share repurchase level required? Or is there something else going on that's inflating the share count, so that's why I'm not optically seeing shares decline?

Yeah, so Jeff, this is Richard. And, very specifically, shares do decline. You have different periods when you're increasing your shares for their compensation plans versus the even buying back. But there is a decline this year in shares of 4 million to 5 million shares. And remember, it's an average that you use in your calculations, not where you are at the spot when it occurs.

Okay. Very good. That's my question. Thank you.

I would now like to turn the conference back over to Mr. Childress for any finishing remarks.

We want to thank everyone for joining us today and submitting online questions. We really appreciate it. And I'll turn the call over to David for closing comments.

Well, as you can see, we are moving fast, we're transforming our business, and we're pleased with our progress. We had balanced performance across all segments this quarter, positive operating leverage in the U.S. We remain focused on the efficiency and the pricing initiatives we discussed today. We see strong growth opportunities for UPS and we continue to invest in the next generation UPS smart global logistics network and to implement our strategic initiatives. Thank you for joining us on the call today.

Ladies and gentlemen, that does conclude our conference call. We would like to thank you for your participation. Have a wonderful day. You may now disconnect.