The Company’s financial instruments measured at fair value were as follows (in thousands):



			Based on
Assets and (Liabilities) Measured at Fair Value on a Recurring Basis:	Fair Value		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
December 31, 2013
Derivatives ⁽¹⁾	$	—	$	—	$	—	$	—
Bond Portfolio ⁽²⁾	25,140		—		25,140		—
7.75% interest rate swap agreement - fair value hedge ⁽³⁾	18,671		—		18,671		—
Total	$	43,811	$	—	$	43,811	$	—

See the further discussion of Omnicare’s application of the authoritative guidance for fair value measurements, including clarification of Levels 1, 2 and 3, under “Fair Value of Financial Instruments” in “Note 1 - Description of Business and Summary of Significant Accounting Policies”.

(1)

Embedded in certain series of the Company’s convertible debt securities are derivative instruments - contingent interest provisions, interest reset provisions and contingent conversion parity provisions. The embedded derivatives are valued periodically using Level 3 inputs, and at December 31, 2014 and 2013, the values of the derivatives embedded in the convertible debt securities were not material. See “Note 11 - Debt”.

(2)

The bond portfolio is included in “Other current assets” on the Consolidated Balance Sheets and represents investments in a portfolio of high quality corporate bonds and U.S. Treasury bonds that is managed by a third party. The fair value is based on quoted market prices of the individual bonds that make up the portfolio. In the fourth quarter of 2014, the Company liquidated the bond portfolio for cash proceeds of $25 million.

(3)

The fair value of the Company’s interest rate swap agreements is valued using market inputs with mid-market pricing as a practical expedient for the bid/ask spread. As such, the fair value of the swap agreements is categorized within Level 2. In 2014, in connection with the Company’s redemption of all of the related 7.75% Senior Subordinated Notes due 2020 (the “2020 Notes”), the Company terminated the interest rate swap agreements. See “Note 11 - Debt”.

The net carrying value of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximates their fair value at period end. At period end, the fair value of Omnicare’s variable rate debt facilities approximates the carrying value, as the effective interest rates fluctuate with changes in market rates (Level 2 inputs). The fair value of the Company’s fixed-rate debt securities is based on quoted market prices and, while recorded on the Consolidated Balance Sheets at carrying value and thus excluded from the table above, are included in “Note 11 - Debt”.