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 second 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 second quarter 2019 earnings call. Joining me today are David Abney, our CEO, Richard Peretz, our CFO, Kate Gutman, our Chief Sales and Solutions Officer, along with Chief Operating Officer Jim Barber, 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 operational results of our company. These statements are subject to risk and uncertainty, 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 $21 million or two cents per share on an after-tax basis. The charge is primarily from transformation-related activities with the majority allocated to the U.S. domestic segment. In the prior year period, UPS recorded a pre-tax charge for transformation cost of $263 million or 23 cents per share on an after-tax basis. The webcast of today's call, along with the 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 I will turn the call over to David.

Thanks, Scott, and good morning, everyone. During the quarter, we continued making significant progress executing our strategies. As expected, our transformation initiatives are producing positive operating leverage and improved profit, signifying an important turning point for UPS during 2019. These initiatives combined with the strength of our underlying business and scale of our global network, are creating strong results. We generated more than 3% consolidated revenue growth and greater than 6% growth in operating profit. In fact, we grew profit in all three segments and generated the most profitable quarter in the history of our company. Our transformation is also creating greater efficiency and agility and funding reinvestment in new state-of-the-art solutions. This will enable UPS to capture profitable growth opportunities at an even higher level. This morning, I will share a few quarterly highlights. Kate will introduce numerous market-leading solutions focused on driving higher-quality revenue growth and Richard will cover the financial details. Yesterday, we announced the latest wave of new services and solutions, and there are more coming. These services will provide our customers new levels of speed, visibility, control, and market access, especially our SMB, e-commerce, and healthcare customers. This is an exciting and momentous time at UPS, as we leverage the exceptional power of UPS technology and innovation to bring to market new industry-first capabilities. On the efficiency front, our transformation initiatives are enabling a faster, more flexible network. In the U.S., we opened three major automated hubs in the quarter, adding more than 2 million square feet of new, highly automated sortations. The modern facilities brought on in 2018 and 2019, along with significant changes we're making to our network, are improving transit times on key lanes for improved local, national, and global customer service. We're also adding highly efficient aircraft in the U.S. and in other major international trade lanes in line with shifting volume levels. Between 2017 and 2022, we will add 44 new aircraft, which creates more than 10 million pounds of additional air capacity in the network, the largest air capacity expansion in the industry in recent history. In fact, this year, we will add the most annual capacity in our multi-year program by deploying 11 new 747-8s and 767s, and the timing of our actions couldn't be better, with the largest e-commerce shippers adopting next day and often moving from our competitors' two-day options to our one-day services. This structural change is creating opportunities for UPS. Our additional air capacity and modern integrated network offer unmatched flexibility and position UPS well to serve changing customer needs. In the quarter, average daily volume for UPS next year surged more than 30%, the strongest growth in more than a decade. Our air market share growth is accelerating, and we are strengthening our industry leadership. UPS is in a unique position to enhance financial performance as we create new solutions that enable shippers of all sizes to meet accelerated delivery expectations of their customers. Turning to the trade environment, UPS has long supported free trade, making cross-border commerce easier for all businesses. I recently met with top trade officials from the US and from China And while I'm encouraged by the commitment of the negotiating teams, we need to see more measurable progress towards a comprehensive agreement. At the moment, the global business community is facing prolonged trade uncertainty in Europe and elsewhere, and forecasts are softening. Global industrial production was lowered to about 1.5% for the year. Additionally, world exports are now forecast to grow at a slower pace than global GDP. Nevertheless, UPS is using the flexibility of our network to help our customers optimize their supply chains and take advantage of continued growth opportunities. The US economy appears to be in better shape with lower unemployment, healthy consumer demand, and forecasts for improved US GDP. The concern for the US is industrial production. The IP outlook for the fourth quarter is forecast to be slightly negative on a year-over-year basis. Regardless of external conditions, our transformation initiatives are making UPS more competitive and more proficient at helping our customers. The progress in our operations and the exciting new solutions we announced yesterday were made possible by three things. our strategies, investments we're making, and the execution by our people. I would like to thank our employees worldwide for their tremendous contributions to our success. Momentum is building. We remain confident our strategies and initiatives will drive even stronger revenue quality, create further efficiencies, and improve company profitability. We will continue to accelerate our initiatives in 2019 and beyond. Now, I will turn it over to Kate to share more detail about our new services and solutions.