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 Fourth Quarter 2016 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. And, as a reminder, today's call will be recorded. 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 fourth quarter 2016 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 2015 Form 10-K and the 2016 Form 10-Qs. These reports are available on the UPS Investor Relations website and from the Securities and Exchange Commission. During the quarter, UPS recorded a non-cash after-tax mark-to-market pension charge of $1.7 billion. The charge resulted from lower discount rates and asset returns. Lower interest rates used to calculate the plan discount rate contributed to the bulk of the shortfall. In addition, investment returns on plan assets were negatively affected by the overall market performance. In the prior year period, UPS recorded a non-cash after-tax mark-to-market pension charge of $79 million. The charge resulted from lower asset returns that were partially offset by higher discount rates. More details on mark-to-market accounting are available in a presentation on the Investor Relations' website. GAAP diluted earnings per share for the fourth quarter 2016 was a loss of $0.27. Excluding the impact of the mark-to-market pension charge, adjusted earnings per share was $1.63, while fourth quarter 2015 GAAP diluted earnings per share was $1.48 and adjusted earnings per share was $1.57. Unless stated otherwise, discussion today will refer to adjusted results. 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 strategic nature. Callers are asked to submit only one question, so that we may allow as many as possible to participate. Before I turn it over to David, I want to remind everyone of our Investor Conference on February 21. UPS senior leaders will update you on our latest technology and our long-term strategy. We look forward to seeing you at the conference. Now, I will turn the call over to David.

Thanks, Scott, and good morning, everyone. UPS produced record earnings in 2016, and revenue reached an all-time high of $61 billion. We completed the initial stages of our long-term investment strategy, which enabled UPS to accelerate e-commerce and international shipment growth in the second half of 2016. For the fourth quarter, the International segment delivered another extraordinary performance, with shipment growth exceeding 7% and operating profit rising by double digits for the eighth consecutive quarter. Over the last two years, our International business has built a strong foundation, generating 30% incremental profit growth. This positive momentum in our core International business model will continue going forward. Looking specifically at peak season, UPS helped our customers complete another successful holiday season. We delivered more than 712 million packages globally, a 16% increase over the same period last year. This record volume was driven by strong and steady e-commerce demand throughout the period. Our embrace and, in reality, our facilitation of the e-commerce boom offers even more growth and earnings potential as we further transform our network. We will continue to invest in air and ground capacity and operating efficiency improvements in order to fully capitalize on the e-commerce growth with an improved bottom line. In the U.S., we completed investments that enabled our network to respond with on-time service, even with this record-setting volume. However, during the quarter, we experienced a significant shift in mix toward lower revenue products. This, combined with the cost of facility investments yet to come online, weighed on our Q4 results. In 2016, we completed nearly 200 facility projects and announced about 7 million square feet of new capacity. This included a dozen all-new facility or major modernization investments. And we are moving rapidly towards completion of many of these projects. During the fourth quarter, we…

Thanks, David, and good morning, everyone. During the fourth quarter, UPS produced strong revenue growth of 5.5%. Top-line gains were driven by the opportunities in e-commerce and robust international shipment growth. Earnings per share came in at $1.63. And full year 2016 EPS was $5.75, an almost 6% increase over last year. International continues to lead the way, completing its eighth consecutive quarter of double-digit profit expansion. The U.S. Domestic segment delivered record volumes and adjusted to a historical shift of product mix. Finally, Supply Chain & Freight grew top line, tonnage, and shipments, but is still managing through tough market conditions. Now, turning to details within each business segment. U.S. Domestic revenue was up 6.3% to $10.9 billion in the quarter. Fuel revenue was a benefit to the top line growth by about 20 basis points. Package growth was strong the quarter. Its average daily volume was up 5%. Ground products were up 5.4%, driven by more than a 25% jump in SurePost volume. We also had solid gains in our Air products. Next Day Air shipments increased 4.4%, and Deferred Air was up almost 3%. Strong market demand for our e-commerce solutions created a significant shift in product mix during the quarter. B2C shipments grew at 11.5%. We reached a number of historic levels during the quarter, including 55% B2C, the largest volume increase in a quarter and the highest month ever at 63% B2C in December. We also delivered to an additional 2.5 million new addresses this quarter. These UPS records demonstrate the expanding reach of e-commerce, which comes with great opportunities and some challenges. On the commercial delivery side of the business, B2B shipments were down slightly. Growth in return shipments was double-digit. However, commercial activity remained soft, including brick-and-mortar deliveries. Weak industrial production trends, revenue…

Our first question will come from the line of Chris Wetherbee of Citi. Please go ahead.

Hey, great. Thanks and good morning. I wanted to ask a question on Domestic margins. So, Richard, you just noted that you're expecting margins to improve slightly, I think, in 2017. What are the specific actions you're going to be taking? We're seeing this sort of mix shift happening here. You mentioned price earlier on the call. Is price going to be the primary tool? Is there a way to accelerate that to maybe see a little bit more than slight improvement in 2017? Thank you.

Sure, Chris. I think the first thing to think about here is that based on this tremendous change in mix, we think it's important to continue to lean in. And so, what you'll see is that we're going to actually quicken the pace of our CapEx, because we think the benefits long-term make sense. So we're going to take some operations penalty, and that's why you see the margin going what it is. But it is two sides to the equation. And in a minute, I'll ask Alan to comment on the revenue side. But from a cost side, we continue down the same path we've been on, but with this tremendous opportunity, we feel like we can take the challenge on because the market is expanding and gives UPS an opportunity to continue to grow. And that's why you see in our guidance, that we actually guided higher than our historical norm. And you saw for this quarter, actually the fastest growth of revenue that we've seen in any of the quarters this year. Alan?

Yeah, thanks, Rich. Clearly, our integrated model generates superior margins and returns. However, as Richard alluded to, it's more complex to manage when the volume surges or when we see these product mix shifts that we're seeing, unlike any past trends. So the first goal is to ensure that the revenue aligns with the new product mix and the peak value that we're creating for our customers. So for 2017, we've already taken some significant action. The 2017 GRI was really targeted to maximize our base rates and profitable growth. And, in addition, there's a few notable items that are targeted specifically at some of these changes we're seeing. First is, we have a new DIM weight divisor for all the U.S. domestic packages greater than one cubic foot. We've changed that from 166 to 139. And then with e-commerce, we're also seeing a lot more of these larger packages. So we've changed our additional handling fee for all packages with lengths over 48 inches versus 60 inches. We did that back mid-year for Ground in 2016. And for Air and SurePost, that's effective for 2017. And just one other note on the large packages, we've also raised our over max charge very significantly. So those are a few of the actions that we're taking, but certainly there's going to be additional focus on yield management improvements for peak and year-round to make sure we're aligning our price to our cost to serve and the value that we're creating for our customers, ensuring we're receiving proper returns. Thanks for the question, Chris.

Our next question will come from the line of Ken Hoexter of Merrill Lynch. Please go ahead.

Hey, great. Good morning. If I could just follow up on that a little bit, you keep investing to keep pace with e-commerce, so your outlook is a 0% to 5% EPS growth. You mentioned the 500 basis points impact from currency. I guess the $400 million is a little higher than the prior $300 million target. Is that a structural shift down from your prior EPS long-term growth rate? Does this shift back over time as investments slows? Maybe you can talk a little bit about that structural change.

Sure. I'll start by saying that when we look at guidance, we look at two things. First, we look what's happening inside UPS, and of course we look at the economic conditions. In terms of inside UPS, we're continuing to create operating efficiency through implementation. But what we're really doing is leaning in and saying, we need to do this faster. And so that creates long-term value, because when we change our network, we're changing it for not just our B2C volume, but we're changing it for all of our products, because we run that integrated network. So we will see some operating penalties in the short-term as we have temporary buildings, as we do more hub mod a little faster, things like that. But at the same time, economically, we provide a guidance range that's realistic. And so, that's why it's actually – the guided number was 1% to 6%, (28:52) but you have to add that 500 basis points to it, or $0.30 a share, and you get to something that shows underlying growth actually continuing to be strong. And essentially, when you look at – because you referenced the old guidance numbers – if you look back in 2014, the forecast for industrial production was different over the last two years. It stayed soft. There was supposed be a recovery mid-2015, and that did not occur. Additionally, you've seen this continued contrast in consumer versus industrial growth. And, of course, the last point is that the pension discount rates and interest rate environment generally have stayed softened really for eight years, and again, there was an expectation back in 2014 that that would start to recover. So we'll cover all this in a lot more detail when we meet in a few weeks at the Investor Conference, but we feel like, when you put it all together, the underlying business is performing well. We're preparing it for the future, and that's why we've guided the way we have.

Thank you.

We're going to take a online question from Brian Ossenbeck at JPMorgan. And Brian's question is about the investments in Europe, the $2 billion investment that we've laid out. And to the extent that the program is improving time in transits across our International Ground network, when will the benefits really start being realized?

Okay, Brian. This is Jim Barber. I'll take that one. I guess I could start with the last question and move back to the first is, when will the benefits be realized? I think they continue to be realized every year we perform our growth model in Europe. Very specifically to the question, a couple of points, is that I like to say that the buildout in Europe is in thirds. We've completed a third, we have a third underway and a third yet to go. I almost liken it to an integration, it just happens to be organic versus inorganic. And the reason I say that is, when we're done, we will have actually modified about a third of our network in Europe. Now to one more point, I think would resonate on the question and the discussion about, when will benefits accrue? Earlier in the year, we took a look at the network and decided we needed to speed it up on behalf of consumers in the market. We actually modified 7,000 lanes in 27 country pairs, effectively speeding the network up by a day in every case across intra-Europe. The proof point is that, if you look at the growth model in Europe, the first quarter was flat. The second quarter, we grew on the ground at almost 6%, the third quarter almost 8%, and the quarter we just finished, we grew at about 11%. So I think the question about, when will the benefits accrue, I think that's rhetorical. And I think the issue is for us to keep it going. And in 2017, our next steps will be up in the air to continue the expansion. So I appreciate the question.

The next question will come from the line of Tom Wadewitz of UBS. Please go ahead.

Hi. Yeah, good morning. I wanted to ask you a little bit more about the Domestic margin pressure that you experienced in fourth quarter. Is this primarily a start-up cost issue? And you did describe how you ramped a lot of facilities up, and that was a pretty strong pace. Or is it more of a delivery-point density issue? You talked about the miles driven, that that was pretty efficient, but your stops were up a lot. So I don't know if you can kind of differentiate if it's both or more of one of the other. And then, I don't know if you have any thoughts that you want to provide on the, just where you're at on the hub modernization program? Because you did refer to accelerating that a bit, I think, versus what the prior plan was, so I guess those are the questions. Thank you.

Sure. So, when you look at the operating margin, the biggest impact to the operating margin for the fourth quarter was really driven by the balance of volume. We saw, in fact, a dramatic shift in B2C. And we went back all the way 10 years, and this was the fastest pace of movement from B2B to B2C on a weighted average. So, on one side, it's partly driven by that. The other side is what's happening externally, too. And, of course, that means the industrial production is still – remained soft. In a minute, I'm going to ask Myron talk a little about specifically the operations, but what we're really saying is, by talking about our increased CapEx really this year, we went up over 20% and next year we're going to do it again, it's really about quickening the pace so that we can continue to transform the network, because long-term, that's going to improve the margins. And it's actually going to help or be a tailwind as we come against more volume that has a little less density. We are still creating that synthetic density through SurePost redirect, through My Choice and the use of access points. But when you put it all together, this is really about, we're mid-cycle in a process that we laid out a few years ago. And we said it would be about a five-year process to get done. And we are going to quicken a little bit to get it done, because of the results and the value it creates is worthwhile. With that, on hub mod, we're going to talk about that at the Investor Conference in a few weeks, and I'll ask Myron to talk specifically about the Domestic business.

So, Tom, quickly, we're, as Rich mentioned, mid-process of a multi-year approach to our automation process, but they are giving us 20% to 25% greater productivity. That helps us to improve flexibilities, reduce the handles in our network, which obviously continue to help us reduce or bend the cost curve. So we're about mid-way through the process, with most of the capacity and automation coming online in 2018, 2019 and 2020. But as Rich mentioned, we'll give you more information in a few weeks.

This is Scott again. Let's just make sure that there's only one question. We're trying to get through as many sell-side analysts as possible, so we'll only select one question moving forward per analyst.

Our next question will come from the line of David Vernon of Bernstein. Please go ahead. J. David Scott Vernon - Sanford C. Bernstein & Co. LLC: Hey. Good morning, and thanks for taking the question. Richard, just maybe can you give us your thinking on how you get comfortable that the Domestic margin has kind of found a floor here, and whether or not you can give us any more detail on how big the OpEx penalty that you pulled forward is for 2017?

Okay, David, good morning. When we're looking at the operating margin and what we're doing, it really has to do with several different initiatives that we have coming on. We have about 15 or so initiatives this year that we're investing in that are really about the future, both from a capacity standpoint, but also from a capability standpoint. I think it's best if we leave a lot of that discussion for when we meet at the Investor Conference, but I do think the important part is that we think there's two sides to solving this. The one side is continue bending the cost curve, and we've seen that with ORION. And if you think about these different projects we're talking about, they're the same kind of thing; continue to find automation and efficiency through investment of capital. At the same time, there's the revenue side and the things that Alan talked about. I think if you also step back for a moment and you look at where we are today versus a few years ago, because there's been references to that, since 2014, our revenue in the U.S. has grown 9%. And since 2014, our profit has grown almost 18%. So while we know we're not quite where we wanted to be this quarter, we do know that even though we took on historical numbers from B2C, fastest growth we've seen in 10 years, that the returns, while not where we want them to be, are still very strong. And we are building for the long-term with transforming our network, and this is just one of those steps in the process that we laid out a few years ago.

Yeah, so this is David. I'd just like to reinforce what Richard said. Just want to remind everybody, we did have record EPS for the fourth quarter and for the full year. E-commerce brings challenges. It certainly brings great opportunities. We believe we have the right strategy. We feel we're making the right investments. If this quarter told us anything, it told us we've got to quicken the pace and we've already said we're going to do that. And we're going to seize the opportunities that we know can come worldwide from B2C. So we see it as a very good opportunity for our people, and we're going to capitalize on it. Thank you.

The next question will come from the line of Scott Group of Wolfe Research. Please go ahead.

Hey. Thanks. Morning, guys. So wanted to ask about the CapEx guidance, it implies about 6% of revenue on CapEx, which is the highest we've seen in, think, over 10 years. Would you characterize this as kind of a one-time step-up in CapEx, given kind of quickening the pace of capital projects or is this more of a new kind of run rate for CapEx? And maybe just at a higher level, can you just talk about, do you – you've said in the past that e-commerce was going to be a business that requires lower capital. Do we need to now rethink that, where it's a business that requires higher capital?

Sure, Scott, and again this is Richard. I think one thing to keep in mind here is our priorities have always been the same, which is first is to reinvest in the business because of the high ROIC being mid-20s or higher. When we look at it, we're not talking about investing in automating the networks because of only e-commerce. As I hopefully have communicated in the past, one of the benefits of everything we invest is that every package gets a benefit, and they get a benefit because we run that single integrated network. And so, we're investing to create automation and the use of technology across the network in major hubs. And that's going to impact both our B2C volume, our B2B, our Next Day Air and our exports and imports out of the U.S. That all being said, I think how you should think about the CapEx is for the next several years, we'll be a little higher than we have been, say, the last six or seven years. But it's all about continuing to create value, continuing to grow this company a little bit faster than historical norms. And that's why we also guided on the revenue the way we did. So we'll again talk a little bit more about our CapEx and where we're headed at the Investor Conference, but I think that gives you a pretty good picture of where we're headed.

We'll take an online question. This one, we've had multiple questions on trade. The questions are thoughts around global trade outlook with this new administration; how that's going to impact our business as well as the comments on the TPP and that losing favor in the current administration.

Okay. This is David Abney. The first question came from David Ross [Stifel, Nicolaus]. And you know in spite of the headlines, and there's been quite a few, President Trump is really not against trade agreements. Now, he's made it very clear he wants trade agreements to be fair from a U.S. perspective. And he also has made it clear that versus multilateral agreements, that he's much more focused on bilateral agreements. UPS, as a company, we support trade agreements. We support bilateral. We support multilateral. And I can tell you that in every country where the U.S. in the last 10 years has reached a trade agreement, we have seen an actual real increase of packages entering our network going out to these countries, U.S. exports, of a 20% increase. And 20% increase, whether you get the benefit from many bilateral agreements or one multilateral agreement, you can see how that adds up. We did get a separate question, and it was concerning TPP and how disappointed are we that the U.S. has withdrawn from TPP negotiations? And obviously, UPS is a big supporter of TPP, and we thought it was a modernized trade agreement for the 21st century. And so, yes, we would like to see multilateral agreements like that get approved. But I can tell you that if you follow the President's strategy, and you do a series of fairly quick bilateral agreements with the major countries that are involved in TPP or that may eventually have been included in TPP, we think you can still get there, maybe not as quickly as you would in this manner, but we are encouraged that the U.S. is going to focus on trade agreements. And we are expecting to see some progress in a fairly short period of time. So thank you for the question.

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

Thanks. Good morning. David, you mentioned you're a fan of corporate tax reform. And I was hoping to get your thoughts on just the House GOP tax plan as it's written and then perhaps some comments on the details of the repatriation of cash held overseas, CapEx expensing, interest, the loss of deductibility; just how you think that would impact UPS as a company. And then also the border-adjusted provision, obviously, tied to that for the time being, how would that affect your customers if that were to be implemented? Thank you.

Brian, we're going to take the first part of that question, just the tax reform.

Okay. Thanks for that part of the question, Brian. And I may be able to cover a little part in answering this one, too. But first, you've got to realize that we have a high tax rate. It's about 35%. And so when we hear about comprehensive tax reform, we get pretty excited pretty quickly. There's no doubt about that. And we look for a competitive tax rate. We also look for the territorial provision that we can bring earnings back. When you get to the House blueprint, while we do appreciate the tax rate, we do share some concerns that many of our customers have about the potential impact of the border adjustment tax. And one of the first questions is we're trying to find out just exactly how that's going to work. And it's a little bit early. We don't have all the answers yet. So we're certainly pursuing those answers. And the second part of this, you have to know how it's going to work to see if it's really going to affect trade coming into the U.S. So from the blueprint, we are certainly excited about a lower rate, but we think there's a lot of concerns and a lot of questions about the border adjustment tax, and we need answers before we could go much further there. So thank you for the question.

The next question will come from the line of Brandon Oglenski of Barclays. Please go ahead.

Hey. Good morning. And thanks for taking my question. So, David, I realize you are at record earnings levels for the company, but I think if we look from 2014 through your guidance in 2017, we've only hit the long-term guidance one out of those four years. So when you talk about bending the cost curve going forward, we've heard about these technology investments for a long time now, package flow technology going back a while. We've heard about ORION for a number of years. I know you guys have implemented that; synthetic density, automated hubs. We can go on with the Coyote acquisition, but what is it about the business where you've just seen the degradation in margins for the past decade? And why is it that we think going forward, this acceleration investment is going to help profitability in the business?

Well, I'm actually going to take the question, Brandon. This is Richard. And I think the first thing you have to look at is, again, if you go back to 2014 and our long-term guidance, we expected to see growth in industrial production in 2015 and 2016. And really for the last year and a half, last year and three-quarters, you've seen that go negative. That has a big impact on growth rate of the B2B business. And earlier, I talked about, we looked at both the internal and the external, and we try to give you a range of realistic goals based on economic assumptions, and they've come in much differently. The other thing that plays a large part in where we sit is the discount rate is something like 100 basis points different. And you saw what that did to mark-to-market. That impacts expense, too. But separating all the external, what's happening inside the business is you're seeing this massive trend of B2C going much faster. We talked about in 2014, that it would be a five year process to get our hubs all automated. And so we're mid-process in it. And what we're really saying is for 2017, 2018, we're going to go a little faster than what we originally said because the value of that is so great, not only for the B2C, but for all of the business in Ground and our Next Day Air, et cetera. So one of the reasons we're coming together in a few weeks is really to talk about where we see the business today, what the economics numbers kind of show externally and how we see we're going to continue to grow this business. Because at the end of the day, one of the parts that's very important to us is that we do spur growth, and that's why you see us guide on revenue above our historical norm.

And this is David. Just like to wrap up that question and still want to remind that we have the best margins in the industry, and there was a little bit of reference to, over the past couple of years. Let me just give you a quick comparison, just to keep everything relative. And I'll compare fourth quarter 2016 to fourth quarter 2014. Our operating profit's up over $200 million and 17.7%. We do have a very interesting opportunity when it comes to B2C. And it is not progressing in a linear fashion. There will be times that it doesn't speed up quite as much, and then there'll be times that it'll shoot forward, like it did now. But under no circumstances should anybody doubt whether we have the strategies or making the right investments. ORION, that you do hear us talk a lot about, we had 5% volume growth, and the number of miles that we traveled was an additional percentage-wise, Richard?

0.3%

0.3%. So you just look at that. And if we had not made the investments in ORION, you just normally expect that you're going to grow volume by 5%; you're going grow stops by 4.7%; that you'd grow miles accordingly. And we were able to reduce that to 0.3 of a mile. These automated hubs have given us 20%, 25% efficiency. And so, the end of the day, it is not that we need to change our strategies, we need to quit making investments. The end of the day is, we've got to speed and go forward. We have to stay up with the market. The market is clearly moving greater B2C. That's the focus that you will see UPS from both an innovation, from a cost, and from working with our customers to make sure that we get paid for the cost to serve their packages. Thanks for the question, and let's move on to the next one, please.

And our next question will come from the line of Scott Schneeberger of Oppenheimer. Please go ahead. Scott Schneeberger - Oppenheimer & Co., Inc.: Thanks. Good morning. Swinging into International, could you discuss your outlook for package yield international, excluding ForEx, and elaborate on some of the key drivers going forward; looks like that's one of the stronger areas? Thanks.

This is Jim. So I think Richard kind of got close to that in the beginning. I think when you clean it up for FX, we're going to be sitting about 18%, and that certainly is a margin we're comfortable with. If you look at going forward, I've talked previously, a few minutes ago, about Europe. No question that that is paying dividends for us. I think, last quarter, we talked about our 747-800s. We touched on the fact that Asia grew almost 20%, to right at 20% for us in the fourth quarter; hence, leaning into the aircraft that'll start to come online in October of this year, which will pay dividends for us in peak of 2017. We're expanding in 21 cities in China. In those cities specifically, the growth rates are truly 50%, where we're putting in a different model to go to market in China, so we really feel good about Asia. And then I think the other thing that I would mention that's kind of gone quietly through International is, this year, last two years, we purposely put in Express expansion into the world. We kind of took a look at it internally. David pushed us to look at growth a little bit differently in 2015, actually. What that meant is that so far, in 2016, we've added Express to 60,000 more ZIP Codes in the world, in 52 different countries. We put 26 new countries on early a.m. at the same time, and proof point, just like the European growth model, our worldwide Express growth for the year 2016, which we will continue to move into 2017, has gone from flat to 4.5% growth to 8%, to now almost 11% growth in the export – in the International products, so we feel good about it, and all these things are coming together to get what you've seen in the past and will continue in the future. Appreciate it.

The next question will come from the line of Allison Landry of Credit Suisse. Please go ahead. Danny C. Schuster - Credit Suisse Securities (USA) LLC: Hi. Good morning. This is Danny Schuster on for Allison. Thank you for getting our question in. So Richard, you mentioned a couple times that one of the two big headwinds outside of your control since 2014 has been the 100 basis point pension discount rate decline. So we just wanted to clarify going forward, how much pension expense headwind is included in the 2017 guidance?

Sure, Danny. I think, when you look at pension expense in 2017, we look at it in two buckets. We look at the multi-employer, and that will grow the same as volume, and so we don't really see any change to that. For the UPS-sponsored plans, it actually will be relatively flat, and it's really driven by the actions we took due to the increasing PBGC premiums and the pre-funding, as well as coming up against headwinds from the discount rate. So the important point here is that we actively manage the pension environment. And we're doing the right thing for UPS and for the investors, but essentially the expense for UPS-sponsored plans will be flat in 2017. Danny C. Schuster - Credit Suisse Securities (USA) LLC: Great. Thank you.

Our next question will come from the line of Jack Atkins of Stephens. Please go ahead.

Hey. Good morning. Thank you for the time. Just following up on your comments earlier about global trade and the new administration, I was just curious if you could maybe talk to the flexibility that you think is in the network to be able to add capacity in certain geographies or reduce capacity in others, given what we're seeing as could be fairly dynamic trade policy coming out of Washington, and the potential tax policy changes. How do we think about your ability to flex up and flex down your cost structure to match what could be changing freight flows?

Okay. Thank you. This is David. The biggest advantage of our network is our ability to flex up and down. And if that means that trade happens more in one area versus the other, then we obviously can move our assets, and we can make those adjustments. We still, though, we don't believe that the world is falling off the cliff. We think that there will be trade agreements. We think that global trade is still going to continue to grow, and we're prepared to make those adjustments. And if something does happen where trade drops in particular areas of the world, then we will make those adjustments, too. If it means that we have to remove some of our planes from these areas temporarily or if we have to move resources, we will certainly do that. So we're prepared either way, but we're going to work very hard to make sure that everyone understands the importance of competing in the 21st century and that is through trade, which drives jobs, and it also drives opportunities for Americans. Thank you.

Next question will come from the line of Bascome Majors of Susquehanna. Please go ahead.

Yeah, thank you. So can you refresh us on your current rolling strategy of hedging FX forward a month at a time and how far you are into implementing it? Or we said it another way, just trying to get a sense if you're going to feel the impact of the late 2016 dollar strength this year in that $400 million that you guided, or if this is a more gradual headwind that comes on in 2018, 2019?

Sure. This is Richard, obviously, and what I wanted to make sure that I cover on this, the headwind is for the year 2017. And what's actually going to happen over time is we'll see less of this because we're moving from a multi-year hedge, where extreme volatility that came out in 2014 and 2015 saw a dramatic drop. So therefore, we were kind of exposed because it went to one to $1.35 down to $1.11. Earlier last year, we started guiding around our dollar cost averaging, and so it's fully implemented in 2018, but we're fully covered in 2017 as well. And what we do is we buy $1.36 of our coverage each month. And so what that does is takes the volatility out of the currency. And that's how you hedge currencies. So what that means is your year-over-year comp won't have as much exposure because it's only the head and the tail that are different for the comparison periods. That being said, the unhedged currencies have exposure and that's because there's hundreds of currencies and it's all about how the currency reacts against the dollar. We haven't seen the kind of reaction that we saw really in the last six weeks to eight weeks of 2016 historically, where almost every major currency in the world went a different way than the dollar. And that's why we had to guide up that the expected impact for 2017 is around $400 million, but as it occurs through the year, we'll have to continue to give you information.

Thank you.

Due to time constraints, our last question will come from the line of Jeff Kauffman of Aegis Capital. Please go ahead.

Thank you very much for letting me ask my question. You're about 1.2 times debt to EBITDA. You've explained why you're accelerating capital investment and reducing the amount of cash allocated to share repurchase. Since this level of CapEx is going to be at an elevated spend strategically for the next few years, should we expect less cash funneled towards share repurchase or might you be in a position to use some of the balance sheet to maintain the level of share repurchase for the next couple of years?

So again, this is Richard, and I think the most important thing is to remember that our priorities haven't changed. We still think investing in the business, making dividends a priority is important. But having the flexibility based on opportunistic-type things makes a lot of sense, we feel like. At the same time, it does appear we're entering a very favorable cycle for pension accounting, and so that may drive us to do things differently. We'll kind of put all this together and talk a little bit about that when we're together at the Investor Conference, but we think it's important that we're fortunate because we can balance the needs of the business and still have a strong total return to our shareholders. But we're always evaluating ways to accelerate and create value. And again, we'll plan to talk a little bit more about that at the Investor Conference.

That concludes our Q&A session for today. I would now like to turn the program back over to Mr. Childress and panel for any closing remarks they may have.

Yeah. We appreciate you joining us today. I'd like to allow David closing comments, if I would, please.

Yeah, so I'd like to thank everyone for being on the call. And we'd like to just finish up that we're very excited about the opportunities, the opportunities that we're going to have in e-commerce, but the opportunities – we didn't talk about this as much – in emerging markets, and with what Jim and his group is doing in our International business. And then, last is the focus on technology and making sure that we continue to implement technology that's going to make us more efficient. It's going to make us more flexible, and it's going to provide more value to our customers. So, again, thanks for being on the call.

Ladies and gentlemen, that does conclude our UPS Fourth Quarter Earnings Release Teleconference Call. We'd like to thank you for your participation. Have a wonderful day. You may now disconnect.