5.  Fair Value

 

Financial instruments include cash and cash equivalents, notes payable and long-term debt.  The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments.

 

The carrying value of Select’s senior secured credit facilities was $836.0 million and $849.5 million at December 31, 2014 and March 31, 2015, respectively.  The fair value of Select’s senior secured credit facilities was $816.6 million and $846.1 million at December 31, 2014 and March 31, 2015, respectively.  The fair value of Select’s senior secured credit facilities was based on quoted market prices for this debt in the syndicated loan market.

 

The carrying value of Select’s 6.375% senior notes was $711.5 million and $711.4 million at December 31, 2014 and March 31, 2015, respectively.  The fair value of Select’s 6.375% senior notes was $722.4 million and $701.1 million at December 31, 2014 and March 31, 2015, respectively.  The fair value of this debt was based on quoted market prices.

 

The Company considers the inputs in the valuation process of its senior secured credit facility and 6.375% senior notes to be Level 2 in the fair value hierarchy.  Level 2 in the fair value hierarchy is defined as inputs that are observable for the asset or liability, either directly or indirectly which includes quoted prices for identical assets or liabilities in markets that are not active.