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Fair Value Measurements
 12 Months Ended
Jul. 31, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
The FASB issued fair value guidance that establishes how reporting entities should measure fair value for measurement and disclosure purposes. The guidance establishes a common definition of fair value applicable to all assets and liabilities measured at fair value and prioritizes the inputs into valuation techniques used to measure fair value. Accordingly, the Company uses valuation techniques which maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value. The three levels of the hierarchy are as follows:
Level 1: Inputs that reflect unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities;
Level 2: Inputs include quoted prices for similar assets and liabilities in active and inactive markets or that are observable for the asset or liability either directly or indirectly; and
Level 3: Unobservable inputs which are supported by little or no market activity.
The table below summarizes the Company’s cash equivalents and Contingent Consideration measured at fair value (all other assets and liabilities measured at fair value are immaterial) (in thousands):
 
 
Fair Value Measurement as of July 31, 2016
Description
Balance at July 31, 2016
Level 1
Level 2
Level 3
Assets:
 
 
 
 
Commercial Paper
$
2,401

$
—

$
2,401

$
—

Certificates of Deposit
$
2,403

$
—

$
2,403

$
—

 
 
 
 
 
Liabilities:
 
 
 
 
Contingent Consideration
$
11,100

$
—

$
—

$
11,100

 
 
 
 
 
 
Fair Value Measurement as of July 31, 2015
Description
Balance at July 31, 2015
Level 1
Level 2
Level 3
Assets:
 
 
 
 
Money Market
$
7,577

$
7,577

$
—

$
—

Commercial Paper
$
2,401

$
—

$
2,401

$
—

Certificates of Deposit
$
2,651

$
—

$
2,651

$
—

 
 
 
 
 
Liabilities:
 
 
 
 
Contingent Consideration
$
6,900

$
—

$
—

$
6,900


The Company’s cash equivalents are measured utilizing quoted market prices or pricing models whereby all significant inputs are either observable or corroborated by observable market data.
The following change in Contingent Consideration during the years ended July 31, 2016 and 2015 were as follows (in thousands):
Balance at July 31, 2014
$
10,500

Change in fair value
(3,600
)
Balance at July 31, 2015
6,900

Change in fair value
4,200

Balance at July 31, 2016
$
11,100


The lease for Canyons provides for participating contingent payments to Talisker of 42% of the amount by which EBITDA for the resort operations, as calculated under the Lease, exceed approximately $35 million, as established at the transaction date, with such threshold amount subsequently increased annually by an inflation linked index and a 10% adjustment for any capital improvements or investments made under the Lease by the Company. The estimated fair value of Contingent Consideration includes the resort operations of Park City Mountain Resort, following completion of the acquisition, in the calculation of EBITDA on which participating contingent payments are made, and increases the EBITDA threshold before which participating contingent payments are made by 10% of the purchase price paid by the Company for Park City Mountain Resort along with all future capital expenditures associated with Park City. The Company estimated the fair value of the Contingent Consideration payments using an option pricing valuation model. Key assumptions included a discount rate of 11.0%, volatility of 20.0% and credit risk of 2.5%. The model also incorporates assumptions for EBITDA and capital expenditures, which are unobservable inputs and thus are considered Level 3 inputs. As Contingent Consideration is classified as a liability, the liability is remeasured to an estimate of fair value at each reporting date until the contingency is resolved. During the year ended July 31, 2016, the Company recorded an increase of $4.2 million in the estimated fair value of the participating contingent payments, and recorded the related loss in income from operations. The estimated fair value of the contingent consideration is $11.1 million as of July 31, 2016 and this liability is recorded in other long-term liabilities in the Consolidated Balance Sheets.