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 Third 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 third quarter 2019 earnings call. Joining me today are David Abney, our CEO, Brian Newman, our CFO, who joined us in September, Richard Peretz, our former CFO, Kate Gutman, our Chief Sales and Solutions Officer, along with our 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 operating 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 $63 million, or six cents per share on an after-tax basis. The charges are primarily from transformation-related activities, with the majority split between the U.S. domestic and international segments. In the prior year period, UPS recorded a pre-tax charge for transformation cost of $97 million, or nine 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, discussions today will refer to adjusted financial results. Webcast users can submit live questions during the 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 I'll turn the call over to David. Good morning, everyone.

Today I'm going to provide highlights from the quarter and discuss several of the exciting industry-first solutions we recently announced. Then Jim will outline our actions for a successful peak, and Richard and Brian will cover the financial details. In fact, I'd like to welcome Brian Newman to the call as our CFO. He brings broad international business experience, and I'm very happy he has joined UPS. I also want to thank Richard for his numerous outstanding contributions over his 38-year career with UPS. Rich is staying through the remainder of the year to ensure a smooth transition. Now turning to the results. Again, this quarter we're reporting strong performance in a dynamic environment. Our transformation investments continue to deliver benefits, driven by our highly efficient and expanding global network, our focus on targeted growth from the most attractive opportunities, and solid execution of our initiatives. Our innovative solutions are differentiating UPS from others in the industry. As a result, consolidated revenue grew 5% and operating profit grew more than 20%, creating strong operating leverage and the highest quarterly operating profit in the company's history. Margins expanded in all three segments, a testament to the quality of our strategies and disciplined executions. Our integrated network is running well and widespread adoption of next-day delivery is an excellent fit with our expanded air and ground capabilities. As you are aware, trade uncertainty continues to create macro challenges for businesses. We're working closely with our customers to help them adjust while also making the most efficient use of our assets. Here in the U.S., the consumer continues to drive the economy with strong retail, health care, and e-commerce sales bolstered by solid consumer economic conditions. Our strategy is resonating with customers. Despite the slowdown in the industrial sector, as evidenced by B2B volume growth in other sectors for the fourth consecutive quarter, we are benefiting from improved SMB customer mix, and expect it will continue as we prepare for another record peak season. We have recently announced several new capabilities and solutions that support our strategic growth imperatives, small and medium-sized businesses, international growth markets, e-commerce, and healthcare. In the healthcare and life sciences area, I'm pleased to introduce UPS Premier, a new technology-enabled healthcare shipping solution. We're adding next-generation on-package sensors and special tracking technology to provide pinpoint location information on each package. In addition, we have a priority handling program for these shipments that further improves reliability. The sensor technologies and special handling plans provide a high-value solution for great visibility and special contingency actions for critical packages. E-commerce and the rise of online marketplaces and platforms offers boundless opportunities for customers and for UPS. B2C and B2B sellers of all sizes benefit from the convenience of platforms to reach customers and manage their business. Through our digital access program, we're making it easier for SMBs to use UPS services by embedding our shipping solutions directly into the leading e-commerce platforms. On these platforms, our customers are already hosting websites, managing orders, fulfillment, and other tasks. For example, we just announced a new agreement with Stamps.com where UPS is presented as a preferred shipping partner to their more than 700,000 customers. We have a presence on many other platforms and have more to come. This strategy will enable UPS to increase our market share of high-quality B2C and B2B e-commerce packages. As you have seen in recent media coverage, UPS Flight Forward became the first company to receive full Part 135 standard approval from the FAA to operate a commercial-drawn network. We are working to quickly scale and just announced a new healthcare campus delivery program at the University of Utah in partnership with MatterNut. we will transport samples, specimens, and other cargo via drone instead of using couriers. This new deployment is similar to our initial program launched at WakeMed in North Carolina. In another flight-forward development, we're also partnering with CVS Health to establish other drone delivery use cases involving deliveries to residential locations. Together, we will define and implement shipping solutions for urgent deliveries, including pharmaceutical or other CVS Health merchandise. These solutions leverage the speed and point-to-point delivery capabilities of our Flight Forward drone delivery network. This is an important expansion as CVS Health is the first retail partner for UPS Flight Forwards programs. UPS is also working with Amerisource Bergen to utilize drones for delivery of pharmaceutical supplies on hospital campuses served by the company. We're pleased to help Amerisource Bergen develop improved operating efficiency and timeliness, among other benefits realized by drone deliveries. We have also begun a new program with Kaiser Permanente, to develop drone delivery operations at several of their hospital campuses. Together, we will identify solutions to improve patient outcomes and increase overall operational efficiency. We envision UPS drones offering innovative delivery solutions for many industries. Again, more to come. Through our investments, we're strengthening our core business as demonstrated by our operating results. These actions also further position us to accelerate performance. Before I turn the call over to Jim to discuss PEAK, I want to make a few comments. This morning, we announced that Jim Barber, our Chief Operating Officer, has decided to retire at the end of this year. Jim and his team will maintain our strong focus on several UPS transformation projects and will guide our PEAK efforts. He has served UPS for 35 years, and like many of our people, he rose through the ranks to an important leadership position. He has made tremendous contributions during his many domestic and global assignments. I wish Jim a happy and healthy retirement, and now I'll turn the call over to Jim.