Good morning. My name is Steven, and I will be your conference facilitator today. At this time, I would like to welcome, everyone, to the UPS Investor Relations Third 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 Third 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. Also joining us today is Kate Gutmann, our Chief Sales and Solutions Officer. 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 operations of our company. These statements are subject to risks and uncertainty, 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 the 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 focus on answering 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. Again this quarter, we are reporting solid UPS results with revenue gains and good execution in our segments. Our performance is driven by UPS's high-value solutions, broad portfolio of services, efficient global network, and strategic investments. Let me first take a moment to recognize the difficult conditions created by several recent natural disasters and the incredible way our team responded to these challenges. Some of the communities we serve have been severely impacted and we've been focused on restoring service to those areas. I want to express my personal appreciation to thousands of UPSers around the world for their dedication, working side-by-side in their communities and on their routes delivering life-sustaining supplies. In addition, the UPS Foundation committed more than $3 million to support the relief efforts throughout the U.S., Caribbean and Mexico. I can't emphasize enough how proud we are of the UPS team and their great work. It's this kind of teamwork that gives me confidence that we're well prepared to carry momentum forward to deliver a successful peak season. Kate Gutmann will provide details on peak at the conclusion of my comments. Now, let's take a look at the company's performance. During the quarter our focused execution, combined with our ability to capitalize on market opportunities, enabled UPS to meet our financial expectations. Our e-commerce and cross-border solutions help UPS deliver strong revenue growth of 7% on a 4.6% increase in daily shipments. In the U.S. increasing demand for UPS Next Day Air and Ground products drove revenue growth. Focus on fundamentals, combined with the benefits of recent investments, produce good results, especially when you consider the unexpected headwinds we faced. The International segment continues to serve as a growth engine for the business; producing record third quarter operating profits. Several…

Thanks, David, and good morning, everyone. It's great to be here to review our strategies for the 2017 peak season. Our peak strategies are designed to efficiently and reliably serve all UPS customers, whether those who experienced the highest seasonal spikes in demand, to small and medium-size customers, as well as our B2B customers like those in healthcare. The UPS team has worked throughout the year to prepare for the e-commerce growth we anticipate this year. In fact, between Thanksgiving and New Year's Eve, we expect to complete a record 750 million deliveries worldwide, about 40 million more than last year. In the U.S., the National Retail Federation expects total holiday retail sales to increase between 3.6% and 4%. They also expect non-store retail, or online sales, to be higher this year, up between 11% and 15%. At UPS, we're focused on delivering a successful peak season for customers and investors through more collaboration, more capacity, better control, and a strong commitment to service. First, we're focused on improved collaboration with customers for better forecasts, so we can collectively smooth work across the network. We are helping customers optimize the experience they provide their customers, from the first click to the final delivery. More extensive collaboration this year will better align UPS solutions and capacity with seasonal promotions and fulfillment strategies. We work closely to obtain daily shipping estimates by location and even by product. We've built operating and communication plans that allow us to respond to changes quickly. A second area of focus this year is expanding capacity. UPS customers will benefit from several facility expansions and the technology investments that we've made throughout the year. We've increased UPS delivery capacity through a combination of permanent and temporary facility expansion. Across the U.S. network, we've increased both package delivery…

Thanks, Kate. UPS had another successful quarter. Our results highlight the flexibility of the global UPS business model and the power of our investments. We've managed through headwinds in the U.S., delivered broad-based strong growth in the International business, and continued generating excellent results in the Supply Chain and Freight group. The UPS team's execution this quarter generated earnings of $1.45 per share, driven by sustained revenue expansion in all segments. Looking closer at the business segment, in the U.S., revenue and costs were negatively impacted by natural disasters in Texas, Florida, and California, creating a drag of about $50 million of operating profit. However, growth in package volume was positive, up 3.4%, with revenue up nearly 4%. We've had strong growth in our business going back to mid-2016. Higher growth in both Next Day Air and Ground products was driven by e-commerce demand as average daily shipments increased 8% for Next Day Air, while Ground was up 3.4%. Package yields improved 2% year-over-year, and base rates came in at the higher end of our 2%-to-3% range. Fuel surcharges added to the yields by approximately 40 basis points. Fuel and base rate improvements completely offset a drag from customer and product mix this quarter. The U.S. operating profit came in at $1.2 billion. After adjusting for the unplanned events, our profits were in line with our expectations. Results this quarter include one-less operating day, about $40 million of costs from our previously-discussed ongoing investments in new buildings, and the deployment of Saturday operations. Now, let's turn to the International segment. It was another great quarter. The third quarter reported profits were up almost 9%. And on a currency-neutral basis, operating profit was up 20%, making this the 11th straight quarter of double-digit growth. The largest operating profit gains were in…

I will now turn the program back over to our Investor Relations Officer, Mr. Scott Childress, please go ahead.

Thank you very much. Our first question, we're going to take an online question from Dave Ross of Stifel Nicolaus. David's question is, now that the SF Express joint venture has received regulatory approval, what are the next steps? What is the expected impact, if any, on the business from the JV in 2018?

Okay. This is David and I'll take the first part of that question then I'll pass it over to Jim. We were excited that we did get approval and approval on a timely basis. The reason that's so important to us is there's just so many opportunities between China and the U.S. And this joint venture just combines SF Express' deep China presents with our UPS integrated global networks that we just see as a very good combination. That being said, Jim, why don't you give a little more detail?

Sure. I'd be glad to. So David, I think on the back of David's comments, we've been working on this for well over a year by the way. I would tell you, it's very significant in our mind as a big step for us inside and crossing borders in and out of China. Really what it does for us is it gets us and gives us the ability to go to new places, to reach new customer segments with new products that we haven't had in this market, obviously, for 110 years at UPS. It's going to synergize with our Forwarding business, and it's going to really continue to let us grow in cross-border trade. Just a data point for you that I get very excited with is in the network that SF and their team has, are 173,000 touch-points in China that are made up of couriers and service centers in retail stores that will be able to actually participate very differently going forward than we have in the past. And I think the other thing lastly, because, obviously, the specifics of what's going to happen in 2018 and beyond will become more apparent as we move. I would say that we planned them to be material, obviously. But the team at SF, as well, I think partners very nicely with our team in Asia, and I think we can't undersell that partnership concept as well. So appreciate the question.

We're going to take another online question. This question is coming from Brandon Oglenski from Barclay Capital (sic) [Barclays Capital. Fourth quarter results have been volatile in the past year, with both service and cost challenges impacting profitability for UPS. With another strong peak season expected, can management discuss how the additional resources and costs added this quarter can be better scaled to actual volume demands, while still meeting service commitments?

Okay. Brandon, thank you for that question. And we're going to spend a little time on that because it's got just a few different angles. So I'll say a few words and then going to hear from Myron and Jim from their business units, and then Kate from a customer and revenue perspective. But I believe we're well-positioned to have a successful peak season, both from a customer standpoint and an investor standpoint. And it's coming quickly. We've been working a long time on this, and I think there's a lot of confidence throughout the group. So that being said, why don't go ahead with you, Myron.

Good morning. There are several factors that give us confidence in our ability to perform this peak season. Considering the tremendous amount of time that's been spent with our customers to develop accurate forecasts, preparing to hire and train seasonal staff, as well as expanding our permanent and seasonal capacity, we believe that Saturday deployments of our operations will have a tremendous impact on this peak. It'll give us five additional delivery days. We're planning to process 40% more volume on Saturdays, and 80% of the volume we plan to deliver over the weekends will be through the facilities where we've already established Saturday operations. Once again, we plan to hire 95,000 seasonal helpers, in which 35% over the last three years have later been hired into permanent jobs with UPS. The onboarding process will be significantly improved through new technology advancements. It will also help increase productivity through our mobile delivery apps, as well as our abilities to give dynamic sort instructions through Wi-Fi capabilities. We have also added an additional 1 million square feet under roof that will allow us to have additional sort capacities, and we've implemented 10 additional peak hubs, so we feel like we are positioned for success.

This is Jim. I'm going to add a couple of points that I think are material in nature outside the U.S. I'll start in Europe and then I'll go quickly to Asia. Europe, quite frankly, has been one of those years that we've had kind of peak volumes all year long, which is one of the advantages to going into this peak season. Our growth in Europe all year long has approached double digits every quarter, so we've had to add, obviously, both human and capital investment to support that. We've opened three new hubs this year, 170,000 pieces an hour in Europe. Obviously, we've had the unfortunate situation of the cyber-attack in the middle of the year that pushed volume into our network that we needed to respond to. We've added Lyft in Cologne, so the Europe infrastructure as we move into this fourth quarter, I feel like is in a very unique and positive position. And then we go out to Asia. Obviously, we've talked about the arrival of the 747-8s. The first one we took on the ground in Hong Kong on October 18. The next one is October 28. We get another one on November 24th, and then we move into next year. So they also have had a year of very high demand out of Asia that we've had to scale the network. And so in both cases, as a kind of front end of the engine, I think we're in great shape honestly for a great peak season to connect back, obviously, with Myron's network as well in the U.S.

From a customer perspective, I would add that as I mentioned in the opening, collaboration is critical, deep and broad, and the UPS team is now considered trusted advisors to our customers. We've gone through an extensive forecasting process. And also enhanced by some of the learnings from last year, we do this now by location, by product, and we've gone further within our customers' organizations, so that we encompass merchandising, marketing, fulfillment, as well as transportation. All of that leads to mutual success. We've jointly agreed upon special operating plans to help smooth out some of the peak periods, such as the Monday spikes that would be leveled off by operations opening on Cyber Weekend, as well as Super Weekend, and the customers are absolutely participating in that. Better utilizing for the first time Saturday delivery and Saturday pickup, which is market-leading and has been embraced by our customers. And then, of course, the control tower, which we continue to enhance over the years, finding ways to say, yes, more often to un-forecasted needs, and aligning it with the availability in our network. And along those lines, we've continued to reinforce that it's important to align the price with cost of delivering this value and customers are working to ship volume in two weeks to minimize the impact of the surcharge. But if needed in those weeks, the surcharge applies to those packages. So a joint effort and, again, one that we're confident and will lead to success at peak season.

We have a question from the line of Chris Wetherbee, Citigroup. Please go ahead.

Hey, great. Thanks, and good morning, everybody. I wanted to ask about some of the cost headwinds that we've seen in the Domestic segment. It looks like you're pulling forward maybe some costs into the fourth quarter with $60 million, which is up from the third quarter's performance. I guess I just wanted to get a sense how we should be thinking about maybe beyond fourth quarter. It sounds like you're ramping up for peak season, but as we start to move into 2018, how should that cadence to sort of these cost headwinds as you roll out Saturday and build up the Domestic network look?

Sure. Chris, this is Richard. And I think, first, it's a little early to guide, because we are just putting all of our plans together for 2018. What we did earlier this year, say, this $100 million to $200 million operating penalty would be ongoing for the next three years as we continue to not only open the Saturday operations. And the reason the fourth quarter is large is because that's when you have most of the operations open. But it's also, as we operate new buildings and start construction or operating new buildings, there's some penalties as we get these buildings up to the same standard from when they first start to the UPS full implementation, because it's a step function. So again, on the next call, we'll talk about 2018, but we did call out that there would be between $100 million and $200 million for each of the next few years.

When you look beyond this peak season, Brandon (sic) [Chris], take into consideration that we'll be continuing to implement Saturday operations next year. At the onset of peak this year, we will have deployed Saturday operations in over 200 locations. We would expect that to be a bit greater than 90 locations for next year, as well as the additional capacity that we will add for next year. We're going to bring on 5 million additional square feet that will bring into the network next year, so it'll be the onboarding of those locations and the additional head count associated with it.

Great. Thanks.

We have a question from the line of David Vernon, Bernstein. Please go ahead. J. David Scott Vernon - Sanford C. Bernstein & Co. LLC: Hey. Good morning, guys. So it looks like the underlying sort of growth is accelerating here as International supply chain are happening, but I want to kind of get some feedback from you guys on the direction of the Domestic margin as you think over the next two or three years. You've got the implementation costs kind of in the base over the next couple of years. Should we be expecting that the operating profit in Domestic is going to be growing kind of with the top-line from here? Or do you think there is still some possibility that 2017 – or 2018 could be a little bit lower on the Domestic margin side?

Yeah. Again, it's a little early, because we are just putting these plans together, David. This is Richard, obviously. But I think the first thing you should think about is that next year with 5.5 million square feet of buildings opening, it will be muted as well next year, but it really is part of a deliberate plan. One of the things is we've been looking at buildings and trying to do this as fast as we can. And we've said all along we were balancing the opening of the buildings with the disruption to the network. And so we have seen that putting about a million square feet in this year and next year it's 5 million square feet. So the velocity is a little different than we originally planned. But at the same time, as we get our plans finalized we'll share that, but I would expect that it would be a little bit muted on the lower end of where we guided for next year. But we're still putting plans together, so it's a little early for me to say exactly where we're going to land. J. David Scott Vernon - Sanford C. Bernstein & Co. LLC: Yeah. No, I'm not looking for like an exact number, I'm just trying to think like, I think what's keeping a lot of folks nervous about the stock, quite frankly is, is either a lack of commitment, or a feeling that there is a lack of controllability about where that Domestic margin is going to go over the next kind of 2, 3 years. Year-to-year, quarter-to-quarter is not the issue. The issue really is, is the management team feel like they can get a flat to up Domestic margin? And what are the incentives around that to make sure that actually happens?

So I think the first thing is we're looking at this much longer term. I mean we're investing in order to build out our network, not just for the next year or two but really for the next generation. And that plays into it, and if we can move a little faster, it's always going to be the best thing we can do, because our highest return is going to be, of course, reinvesting in the business. And not all growth is going to be linear because, look at our revenue line right now, we're having some of the fastest revenue growth that we've had in over five years. And we think that that's healthy and we'll continue to adjust the network for that kind of growth because we historically have not had that kind of growth. So I would tell you that you should be thinking about we're preparing this for the future, we're looking at the return on invested capital, and all of our goals are aligned with making sure that we continue to increase value and bring the proper return, not only for UPS, but for our investors going forward. J. David Scott Vernon - Sanford C. Bernstein & Co. LLC: All right. Thanks for the additional color.

We're going to take an online question from Scott Schneeberger of Oppenheimer & Company. Can you please address the drivers of the recent improvement in global air freight markets and global trade? How is UPS positioning strategically to capitalize on this momentum?

Okay. This is David, I'll start that and then hand it to Jim. But we are encouraged by the recent improvements in global trade and we think that the global economy certainly has a part with that. But exports are growing pretty much throughout the world, and this is just an important part of our growth strategy. We see Jim's International unit as really a primary growth engine and this is feeding a lot of that growth engine. Jim?

Yes, Scott, I would add three points to what David has said. First, obviously, inventory levels continue to be at levels that are going to push more through that supply chain both, and I'm talking kind of air freight and ocean in this discussion. In the most recent quarter, the data that we see has the ocean utilization at over 97%. So you have a high, high, demand environment now with capacity really becoming tight. Obviously, that's driving the rates up and you can see that across the industry and across, obviously, the players. And then you get up in the air, this is the fourth consecutive quarter where you really had demand outpacing capacity. Obviously, it started with pilots coming out of the air in China, capacity came with it, the air freight rates have tightened, obviously, we all have to manage through that, and then manage the connections. But then in the middle, the third event, obviously, is weather. When all of those three combinations hit you get an air freight and an ocean market that exists as it is today, obviously it will drive transportation rates up, and we have to respond to that. And I think actually the UPS team beginning in Asia moving back out to the west has done a great job. So we look forward to our fourth quarter as well. Appreciate the question.

We have a question from the line of Tom Wadewitz of UBS. Please go ahead.

Yeah, good morning. So I'll maybe stick with that topic of international strength and it's pretty impressive the acceleration in export volume growth. I was wondering if you could give us a little more perspective on some of the pieces of that. I know obviously, you don't talk about market, but how much of that is kind of benefit from TNT cyber-attack that volumes come over? In the future, maybe, how much do you think we ought to consider the SF Express stepping things up? Just trying to get a sense of kind of what might be temporary and what might be you ought to put into the model a double-digit export volume growth for the next couple of quarters or couple of years?

Okay, Tom. That's a broad question. I'll do my best to skinny it down. First of all, let me start with – I think Rich had some opening comments as did David. I think that the way we think about this is, this is just another step that our customers are choosing UPS. We've had 11 quarters in a row of continued momentum. This one, obviously, when you see 19% export volume growth, that is certainly a big one. You pointed to Europe but if you take a look at Europe back in 2016 when we started this, the growth has been accelerating for almost two years now. The intra-European growth started in early 2016 at 6% and then the quarters went up from there. They went to 8%, 11%, 15%, 12%, now 19%. So this has been a very deliberate investment in that market with all of the dynamics that were going on. We started in early 2016. Yes. There is some additional lift in the most recent quarter from the malware event; no question about that. But this growth is more than just Europe, this is a broad-based growth. Richard touched on it as well. We're really growing across the globe. I can't tell you what to put in your models, but certainly from my perspective this is about many years into the future, not just the next quarter. So we're pretty pleased with where we are and we look to the future and tomorrow to keep it going.

Were the numbers you mentioned just the total International export, or those were Europe numbers, you mentioned before?

Those were intra-European export numbers.

Overall, exports grew in all regions. And, actually, it was pretty much aligned to both with the number we had for intra-Europe for all exports. And, Tom, we recognize that there probably was a little extra in this quarter, but to Jim's point we've been on a two-year improvement and we still expect that. Obviously, it doesn't mean that we'll stay at these current levels, because of what happened in the third quarter elsewhere, but we do expect to continue to grow strongly and we've guided that International is an important part of the growth story, and it's something Jim and his team have done a really good job doing in the last few years.

And just to expand on Richard's comments about the two-year story, this has really been about a 10-year story, and then we committed to the $2 billion a couple of years ago and we're probably 40% of the way through that. But we've had big, big success in Europe and in our International exports for the last 10 years, so it's just been a very consistent story. All right?

All right. Thank you for the time.

Thanks, Tom. We're going to take another online question. This question comes from Brian Ossenbeck of JPMorgan. How has the first 747-8s performed in the early testing, which customers are utilizing the domestic air service most frequently? And can the service become more cost effective when cascading the international fleet to the domestic routes?

This is Jim, again. As I mentioned, the kind of rollout plan of the 747s, the 10/18 was the first one, and then the next one is coming in the next few weeks, which is great timing for us. With respect to how are they performing, obviously, as you would know that any time you do get new aircraft you got to make sure that they perform properly, the airline led by Louisville did a great job to make sure we tested them as quickly as we could when they came off the line. We advanced that knowing the demand and the capacity issues that we had. So to get the first one there on 10/18 was a bit earlier than we had seen when we started. The actual first flight that left, those 747-8s can carry 288,000 pounds, and that one carried 288,000 pounds. So it was full to the brim as they say with small package revenue. They couldn't come at any better time, because we've been running, if you look at our block hours, year-over-year increases of almost 5% in our block hours to actually take care of this demand. And so for the bigger ones to come that can carry the extra payload in a more effective and efficient way, it is great for every participant in the actual supply chain. The customers love it. Obviously, we do. The economics love it, and the service loves it as well. So I think Myron wants to add a couple of points from an airline perspective and/or Alan does.

Hey, Brian. This is Alan. Yes, from the domestic perspective to your question about the customers, I would just say that we've been gaining air share each quarter during the last three years, and we'd emerged as the air-share leader. And part of that is our expansion of our 10:30 and noon and Next Day Air early service to more postal codes than any other carrier here in the United States. And we're doing that similarly with our International Express and our International Express Plus services around the globe. And that's very, very attractive to our health care and high tech and professional services industry segments. And then on the e-commerce side, we're obviously growing that quite well also with our Next Day Air Saver, as well as our deferred services. And you can see the strong growth that we had in Next Day Air this past quarter at 8%. Thanks for the question.

A question from the line of Scott Schneeberger of Oppenheimer. Please go ahead. Scott Schneeberger - Oppenheimer & Co., Inc.: Thanks. Just if I could follow-up on those International questions from earlier, could you please elaborate? You call out the revenue growth, 11%, driven by premium products. Could you specify, was that uniquely in any one area? You've talked about broad-based, but curious about the premium products? And then also, nice movement on yield growth in the quarter in International, could you speak about that, particularly export yield growth? Thanks.

Let me start with the yield growth, I guess, is that I appreciate you noticing that because there's a lot of hard work that goes into that. Certainly, we recognized over the last couple of quarters we thought we needed to do a bit better job there to match it. Kate's talked about that in her opening comments. So that yield movement was purposeful and a couple of quarters in the making, and we think it's right for us long-term and the shareholders. With respect to the balance, look, I mean, I think the team's doing a great job. It's growth in Mexico. It's growth in Canada. It's growth in Europe. It's growth in Asia. It's growth in our intra-Asia networks. And, obviously, you start to layer in the likes of partnerships of the SF Expresses in the future and the Middle East investments that we've made, we feel like we've got some good momentum that will continue. So I think the key word is balance and, hopefully, you can see that across the talk we're having today and in the continued dialogue we will have in the future. Scott Schneeberger - Oppenheimer & Co., Inc.: Thanks.

We're going to take an online question. This comes from Kevin Sterling from Seaport Global Securities. Purchase transportation cost as a percentage of revenue has been creeping up over the past two years. Can you talk about your purchase transportation costs jumping as a percentage of revenue during the quarter?

Sure. And this is Richard, Kevin, and, obviously, I'll take this question. I think the first thing you have to do is think about the last two years. And while purchase transportation cost is up, there are two big buckets of purchase transportation. There's what we do internationally, and Jim just talked about how revenue has grown and we've been on a two-year, really, continued improvement plan that him and his team have been working. And then the other side is Supply Chain and Freight. And to give you an example, if you go back and look at our history prior to last year, our revenue growth in the Supply Chain and Freight group has been pretty muted. But yes, last year we grew at 8% and year-to-date we're right now just under 13% growth. Obviously, as Coyote, Freight Forwarding, those all play into the purchase transportation. And so, I think when we look at purchase transportation we think it's healthy. This quarter alone, over 60%, between 60% and 65%, was really driven by International and Supply Chain and Freight. And then when you get into what's going on in domestic, there's a piece of it because SurePost is growing a little faster than the average domestic. And then there's just a normal increases that you would expect. So when we look at it, I know it's a big number reported change, but if you look at what's going on with the business underlying it, I think you see that that goes right in line. And that's why you've seen both International profit growth and then what the Supply Chain and Freight segment has done and really called out in January that we've continue to see improvement this year. And that's what's happened as well.

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

Great. Good morning. David or Richard, can you talk about the accelerating CapEx? You talked about adding new aircraft and now you are jumping from 1 million square feet to 5 million square feet. Maybe talk about the scale going forward? And did your original CapEx targets account for the switch from upgrading your service at your sort centers to the building of new ones that you now plan?

Sure Ken, this is Richard. Obviously, we just talked about it, and hopefully everyone in the call is getting that, part of this is about growth, and the emphasis that growth we talked about it in February. I've said on the call we think we're going to beat the higher end of the range for revenue for the total enterprise. And so when you think about year-to-date 7% growth across the entire enterprise, that's better than we've seen in over five years. Really, really coming out of the recession was the only other time we saw this kind of growth number. And it's about growth today and going into the future. So we're building and expanding the network, optimizing the investments, to look for what's best for UPS. Very early in the CapEx, we said we would continue to tweak, understanding we couldn't disrupt the network too fast because you still need to provide the right service for our customers, but we wanted to go as fast as we could. In the first earnings call in April of this year we did move forward a 747-8 that we actually have in operation today. And then we bought some land over the last year. It's really for buildings going all the way until the next five years, and that's because strategically it was the right place and the right size, and we did not want to lose that land because we knew what are roadmap plans were. When you put all that together, we likely think we'll be closer to 8%or around 8% instead of our initial guidance. But given the return on invested capital and when we do put new assets and investments in the business, the return they get, we think it's the best use for not only UPS but for our investors as well.

Thanks, Richard.

Our next question will come from Dave Ross. And Dave's questions are: Are you more or less positive on 2018 UPS and global economic perspectives than you were during the last call in July?

This is David, I'll answer that. From a macroeconomic standpoint I would say that a little bit more positive about 2018. And just a couple of things, we talked about global trade seems to be growing, Europe is holding up well, there is concerns about Brexit, but for now Europe is holding up well. China has kind of been better than expected, and then exports in general are growing. And then from the U.S. side you see a couple of things. Obviously, the consumer is still driving the economy and especially from the e-commerce, we think that's just going to continue to grow. Excuse me, there's also optimism about the tax reform and what that can do to stimulate the economy. And we believe that that is getting more and more interest. And the last part was the industrial production was affected a little bit this quarter by the natural disasters. Maybe won't bounce back completely in the fourth quarter, but we certainly think that will continue the first part of next year. So good question. I think we are little more positive. Thank you.

Next question will come from the line of Ben Hartford of Baird. Please go ahead. Ben J. Hartford - Robert W. Baird & Co., Inc.: Hey, good morning, all. Thanks for the question. Just maybe for Alan and Myron on the new peak season holiday surcharge. Interested in what the receptivity from the customers have been. Have we seen any changes in behavior yet? What are the planning discussions like in the context of that new holiday peak season surcharge program? How do you expect flows to play out? Do you expect customers to largely avoid that and shift volumes into some the weeks not governed by the surcharges? Do you expect behavior to be unaffected? And maybe in the context of all of that, any sort of incremental risk or concern regarding access to capacity in December, given the looming ELD mandate on the truckload side? Thanks.

Thanks, Ben. This is Kate. I'll actually address the question. We've been working extensively with customers tied to the peak planning. And so to address some of the points in your question, definitely, consumer demand being what it is, some of it can be steered to other weeks but others will actually, of course, maintain in the period. So there will be a mix with the surcharge, but customers are looking at things like self-gifting. And if somebody's buying something for themselves at the holidays, if it can take extra time, then they will actually activate that to smooth the volume out of say something like a Cyber Monday. That helps their fulfillment centers. It helps also the level of peak spike that occurs. So that's one of the mechanisms, the surcharge, to help steer some of that controllable aspect of consumer demand while other aspects, of course, are committed times and needing to flow as committed. So that's some of it. And then the operating plans and the use of Saturday delivery and pickup, as I mentioned previously, are items that are helping to steer where possible, activating our Saturday pickup, which is market-leading. Enables packages to be delivered on Monday from shipped on Saturday. And that's proving to be popular with customers and very positively received. Thank you.

We're going to take an Internet question from Allison Landry. Allison's question is: How much B2C growth did you see during the quarter with brick-and-mortar? And is it outpacing growth from Amazon? What are you expecting? Are you expecting these trends to continue in the upcoming peak season?

Hey, this is Alan. I'll take that. Yeah. So as you saw in our results, we had another strong quarter of B2C growth, up high-single digits in U.S. domestic. But I do want to also note that it's up mid-teens in our International business, and we certainly expect this to continue. The customers out there, both in the U.S. and internationally are responding well to the UPS industry-leading e-commerce value stack. And that's broad-based growth. It's really coming from the bricks and clicks, brick-and-mortar retailers, along with the e-commerce pure-plays. And it's also coming broad-based from a customer size perspective in middle-market, small and medium businesses, and also enterprise. Some of the solutions out there that are really resonating are our newly created Saturday operations that includes Saturday pickup in addition to Saturday delivery that expedites shipments for Monday delivery. And then, obviously, on My Choice, our UPS lockers, our Marketplace Shipping tools and Access Points. And the one thing I want to note, this past quarter, we launched our UPS returns manager, which is a free online tool that enables merchants of all sizes to customize their consumer return services and processes, and our consumers get hassle-free return services. And we launched that in the U.S. plus 43 countries around the world. So we're building that e-commerce value stack both in the U.S. and internationally. Thanks for the question.

Our next question will come from the line of Pat Gruck (56:42) of Wolfe Research. Please go ahead.

Hey, guys. It's Scott. So I apologize if this is a repeat. I've been bouncing around a couple of calls and hopefully you can coordinate better next time. But Richard, just on the fourth quarter guidance, since it's a decently wide range here, just wanted to clarify. Are you expecting domestic margin improvement in the fourth quarter? And are you still expecting Domestic margin improvement for the year? And then did you say if on the TNT benefit in the third quarter, if you are expecting any of that to continue in the fourth quarter?

Sure, Scott. First of all, I think you asked specifically, first around the fourth quarter EPS guidance. And at the end of the day, in my talk, and you can pull the transcript, I went through unveiling the one-offs that occurred in 2016 around the tax and then the impact of the currency this year. And if you pull those out and do the math, the underlying growth is one of the stronger quarters we've had. That's the first point. The second point is we recognize that we'll continue to see both on International and Supply-Chain about what we expected, but we also know in the U.S., IP has come down a little bit post hurricane. We looked at Sandy and Katrina and saw recovery was about a 6 to 12 month process. And so overall we think Domestic is about where we expected it to be, and it's about where we expect it to be given the one-time hurricane and weather. And year-over-year for the fourth quarter we do expect operating margin to increase for the U.S. Domestic. So we've put it all together, we feel really comfortable, and that's why we moved up our range. And at the end as Kate and Myron and Alan have talked about, we spent a lot of time planning and working with our customers to ensure the fourth quarter is good and we deliver a good peak season for customers and investors. Thank you.

So just if I'm clear, so if we kind of normalize for the hurricane, you're still expecting Domestic package margin improvement for the year.

You've got to normalize for the call it – there was also some other quarters where there were some one times, but overall we think we're right on plan if you go back and look at what we've talked about.

Okay. Thank you, guys

We have another question from the line of Brian Ossenbeck of JPMorgan. Please go ahead.

Yeah. Hi, good morning. Thanks for taking my question. I just wanted to come back to the topic of facility expansions. I know you said you're added 1 million square feet this year and looking at 5.5 million square feet next year. If you could just remind us over the next three to five years. I think, Richard, on the last call you mentioned it was about 28 million to 35 million square footage that you might need to add. Is there a potential that that could come down as you get better efficiency built into these facilities? And what sort of capital investments do you think that fully deploying that square footage might entail over the next three to five years? Thank you.

So, Brian, I'm going to specifically talk about where we are right now. We have moved forward some of our especially outer-year land purchases. But what we're also seeing as a growth rate that's at the higher end of where we originally guided to. And so I think we said all along there are tweaks as I mentioned a moment ago, based on how volume comes in, capabilities, you know technology keeps changing, and as technology changes there's additional capabilities we have to think about in terms of how do we automate it? Because anytime we can automate that it helps the efficiency and the movement in the network. It's a little early to talk about the three-to-five year other than what we've guided, but I think as we close out the planning for 2018 I'll come back to it. The one thing we should talk about though is if you look at the Next Day Air and the International growth rates obviously, and the air capacity, we've now grown probably closer to 25% since we last bought a plane in either the International or the Domestic. So we keep looking at that to make sure that we have the right capital because at the end of the day those are great returns and investment in the business is the right thing to do. Thank you.

Okay. Thank you.

That concludes our Q&A segment for today. I would now like to turn the program back over to Mr. Scott Childress. Please go ahead, sir.

I'll hand the call to Richard for some comments.

Yeah. I just wanted to make a few brief comments around some of what's going on around tax reform because with the potential that's unique for UPS is where taxpayers that pays between 34% and 35%. So because of that we continue to look at how do we optimize based on knowing the changes that might occur, and what's in front of us. And what that means is we continue to look at all of our strategies and make sure we're making the necessary adjustments. So we will continue to do that. David is actively engaged, along with the rest of the senior management team, and getting our story out about why we think the competitiveness in the U.S. improves when you bring the tax rate down because we create jobs, and we also can invest in a different way than we currently are. So, there's a lot more to come in this area, but I thought it was important for you all to hear our view that obviously with this change it's a generational thing, and we are planning for it and thinking about it in the right way. And with that I'll turn it over to David.

Okay. Thanks, Rich. As you can see, we are transforming our network for growth and long-term value. We're making great progress, especially in our Smart Logistics Network. Our strategies and investments are paying off, providing good positive returns, and we continue to see good growth opportunities for UPS. And, of course, for the next month or two, we're focused on delivering a successful holiday, both for our customers and our investors, and thank you for joining the call. I appreciate it. See you.