FedEx: Cyber attack on TNT may have ‘material’ financial impact

The Memphis, Tenn.-based integrator is still investigating the total damage done to its newly acquired subsidiary by the virus known as Petya, but the financial implications are most likely material, according to FedEx’s 2017 Security and Exchange filing.    The cyber attack called Petya may have had material financial impact on FedEx company TNT Express, the Memphis, Tenn.-based integrator and parcel carrier said in a statement.
   After filing its annual Form 10-K with the Securities and Exchange Commission, FedEx disclosed that it is still evaluating the financial impact of the attack, “but it is likely that it will be material,” particularly because the company does not have cyber or other insurance in place to cover the attack.
   FedEx implemented its contingency plans right after the attack occurred and as a result, all TNT depots, hubs and facilities are operational at this time, the company said. Customers, however, are still experiencing invoice and service delays as TNT employees are currently using manual processes.
   “Although we cannot currently quantify the amounts, we have experienced loss of revenue due to decreased volumes at TNT and incremental costs associated with the implementation of contingency plans and the remediation of affected systems.”
   In addition to financial consequences, “the cyber-attack may materially impact our disclosure controls and procedures and internal control over financial reporting in future periods,” said FedEx. Furthermore, “the failure to integrate successfully the businesses and operations of FedEx Express and TNT Express in the expected time frame may adversely affect our future results.”
   FedEx acquired TNT Express in May 2016 and is in the process of its long-range integration plan for the Netherlands-based express carrier.
   “Our 2018 results will be negatively affected by our TNT Express integration and restructuring activities, as well as the impact of the TNT Express cyber attack,” the company said. “Our expectations for earnings growth in 2018 are dependent on key external factors, including fuel prices and moderate economic growth.”
   Even so, FedEx said it will continue with its 2018 integration plans.
   “FedEx reaffirms its commitment to improve the operating income at the FedEx Express Group by $1.2 billion to $1.5 billion in fiscal 2020 versus fiscal 2017, assuming moderate economic growth and current accounting and tax rules,” said the company.
   FedEx Corp. stock has slipped 3.6 percent on the news – from $218.99 per share at close of trading Friday to $211.05 per share at Tuesday’s close.