Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to market risk primarily from exposure to changes in interest rates based on our financing, investing and cash management activities. We utilize a balanced mix of maturities along with both fixed rate and variable rate debt and interest rate swaps to manage our exposures to changes in interest rates. Our variable rate debt instruments are primarily indexed to SOFR. Interest rate changes would result in gains or losses in market value of our fixed rate debt portfolio due to differences in market interest rate and the rates at the inception of the debt agreements. Based upon our indebtedness at March 31, 2026, a 100 basis point interest rate change would impact our net earnings and cash flow by approximately $36.4 million annually.
Our cost of operations is affected by changes in the price and availability of fuel. The average cost of aircraft fuel per gallon for the three months ended March 31, 2026 increased 7.3% compared to the same prior three month period. The average cost of vehicle fuel per transport for the three months ended March 31, 2026 increased 9.4% compared to the same prior three month period. Patient transport volume for our operations can vary due to weather conditions and other factors. Therefore, the impact of a change in fuel cost based on current period volume is not necessarily indicative of the impact on subsequent years.
A 10% change in the fuel commodity price would impact our net earnings and cash flow by approximately $14.5 million annually.
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