Fair Value

6 Months Ended

Jun. 30, 2012

Fair Value

Fair Value

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 facility was $878.0 million and $834.3 million at December 31, 2011 and June 30, 2012, respectively.  The fair value of Select’s senior secured credit facility was $823.3 million and $815.6 million at December 31, 2011 and June 30, 2012, respectively.  The fair value of Select’s senior secured credit facility was based on quoted market prices for this debt in the syndicated loan market.

The carrying value of Select’s 7 5/8% senior subordinated notes was $345.0 million at both December 31, 2011 and June 30, 2012.  The fair value of Select’s 7 5/8% senior subordinated notes was $326.4 million and $346.3 million at December 31, 2011 and June 30, 2012, respectively.  The fair value of this registered debt was based on quoted market prices.

The carrying value of Holdings’ senior floating rate notes was $167.3 million at both December 31, 2011 and June 30, 2012.  The fair value of Holdings’ senior floating rate notes was $143.9 million and $160.6 million at December 31, 2011 and June 30, 2012, respectively.  The fair value of this registered debt was based on quoted market prices.

The Company considers the inputs in the valuation process of its debt instruments to be Level 2 in the fair value hierarchy.  Level 2 in the fair value hierarchy is defined as inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.