United Parcel Service, Inc.

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 first quarter 2019 earnings conference call. All lines have been placed on mute to prevent any background noise, and after the speaker's 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 First Quarter 2019 Earnings Call. Joining me today are David Abney, our CEO, Richard Peretz, our CFO, along with Chief Operating Officer Jim Barber, Kate Gutman, our Chief Sales and Solutions Officer, our Chief Information and Engineering Officer, Juan Perez, and Scott Price, our Chief Strategy and Transformation 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 expectations 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 2018 Form 10-K and other reports filed with the Securities and Exchange Commission. These reports are available on the UPS Investor Relations website and from the SEC. During the quarter, UPS recorded a pre-tax charge of $123 million, or 11 cents per share, on an after-tax basis. The charges resulted primarily from transformation-related activities. The webcast of today's call, along with a reconciliation of non-GAAP financial measures, are available on the UPS Investor Relations website. Unless stated otherwise, financial performance discussed today will refer to adjusted results. Webcast users can submit live questions during today's call. We will attempt to answer questions of a long-term strategic nature. Callers are asked to submit only one question so that we may allow as many as possible to participate. Thank you, and now we'll turn the call over to David.

Thanks, Scott, and good morning, everyone. Today I will share results from the first quarter and update you on our transformation partners. I will also discuss the strength it's building in our strategic growth imperatives and share our views on the external business environment. During the first quarter, we executed well on our strategies and are bending the cost curve, creating momentum for future quarters. All business units generated improved revenue quality and successfully executed cost management strategies while building on high levels of service. As our smart global logistics network becomes even more flexible, I'm pleased to say that we're achieving the efficiency goals we expected by automating more of our network. As we open new highly automated facilities, we remain confident that we will achieve our goal of 30 to 35% efficiency improvement when compared to more traditional buildings. With the progress we've made, we are reaffirming adjusted diluted EPS guidance in the range of 745 to 775 for 2019. Turning back to our results, we achieved another quarter of consolidated volume growth, generated high-quality revenue, and expanded network efficiencies for improved financial performance. Supply chain and freight delivered outstanding operating profit, highlighting the agility and power of our asset-light business models. International achieved record first quarter profit and increased volume, currency neutral revenue per piece, and operating margins. And the U.S. domestic segment generated improved revenue quality and grew average daily volume across all products led by our air services. More customers in retail and manufacturing are demanding faster delivery times. Building quality growth from SMB customers is one of our strategic growth imperatives. We continue to see solid yields led by customers in healthcare and those engaged through our digital marketing programs. In addition, returns with SMB grew by double digits, driven by strong holiday e-commerce returns that lasted into February and March. UPS is the industry leader with innovative return solutions that enable our customers to reduce complexity and deliver a positive customer experience. Looking forward, our aim with SMB is to anticipate and quickly respond to the changing needs of our customers, creating solutions that are easier to use, easier to understand, and quicker to implement will increase our share of high-quality volume and revenue from this key market. To that end, we've recently introduced UPS e-fulfillment. Our new platform gives more insight and control to SMB shippers selling across multiple marketplaces and web stores. Our solution allows them to streamline order fulfillment, inventory management, and UPS shipping. In the coming months, we plan to launch other new platforms and innovative solutions along the value chain to further grow SMB revenue. We continue to recalibrate our network to strengthen our market position in the fastest-growing economies around the world, which is another of our strategic growth imperatives. we see ongoing growth potential internationally with the middle market outpacing the enterprise segment, especially in B2B. As the trade environment changes, we regularly identify opportunities to adjust our network for increased efficiency and flexibility. For example, we recently announced the deployment of new aircraft, to service major trade routes between Hong Kong and Europe. These larger aircraft enable growth on this important trade lane and unlock greater efficiencies and capacity within our global network. Serving the needs of the healthcare industry is another important growth strategy for UPS. We are accelerating the launch of innovative solutions for the most complex and most urgent healthcare needs. We're particularly excited about our latest announcement. A few weeks ago, we made history with the first FAA-sanctioned use of a drone for revenue flights when UPS and our partner, Matternet, successfully delivered medical samples across the Wake Med Hospital campus in Raleigh, North Carolina. UPS continues to operate multiple daily drone deliveries at Wakeman, eliminating transit delays for time-sensitive medical samples. This solution opens the door for how drones can be used to improve transport services at hospitals and other large campuses around the world. Turning to the external business environment, Forecasts for global growth are not expected to be as strong as 2018. However, the economy is still growing and creating opportunities. We're seeing continued growth in areas of the world less affected by the trade relationship between the U.S. and China or by the uncertainty surrounding Brexit. The flexibility of our smart global logistics network is uniquely tailored to help customers adapt to changing trade dynamics, minimize supply chain disruptions, and deliver high-quality growth for UPS. Forecasts for the U.S. economy in 2019 remain in a growth mode, but at a slower pace. Importantly, consumer confidence continues to be strong, bolstered by a healthy job market and low inflation. But signs are mixed with industrial production forecasts to soften in the back half of the year. UPS is well positioned to benefit from consumer and macroeconomic trends as we are focused on attracting higher quality revenue and share growth. Our unmatched and diverse portfolio of services and increasingly agile network help our customers counterbalance the effects of macro trends. Before I close, I want to congratulate the 1,436 UPS drivers recently inducted into the UPS Circle of Honor. We now have more than 10,000 drivers that are accident-free for 25 years or more. Congratulations to each of you for your achievement, and thank you for your commitment to safe driving. UPS is on a structured path to enhance performance, create the future of the company, and take advantage of growth opportunities. We remain steadfast in successfully executing our transformation initiatives. We made great progress in 2018. 2019 is a year of continued transformative investment in facilities and technology in our smart global logistics network. which enable even greater efficiency. 2019 will also be a year of high-quality revenue growth as our transformation efforts will free up resources to gain share in the most attractive markets. Now, Richard will take you through our financial performance for the quarter.