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Fair Value Measurements
 12 Months Ended
Jul. 31, 2017
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, Contingent Consideration and interest rate swap measured at estimated fair value (all other assets and liabilities measured at fair value are immaterial) (in thousands):
 
 
Estimated Fair Value Measurement as of July 31, 2017
Description
Total
Level 1
Level 2
Level 3
Assets:
 
 
 
 
Money Market
$
3,008

$
3,008

$
—

$
—

Commercial Paper
$
2,401

$
—

$
2,401

$
—

Certificates of Deposit
$
2,405

$
—

$
2,405

$
—

Interest Rate Swap
$
236

$
—

$
236

$
—

Liabilities:
 
 
 
 
Contingent Consideration
$
27,400

$
—

$
—

$
27,400

 
 
 
 
 
 
Estimated Fair Value Measurement as of July 31, 2016
Description
Total
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


The Company’s cash equivalents and interest rate swap are measured utilizing quoted market prices or pricing models whereby all significant inputs are either observable or corroborated by observable market data. The interest rate swap is an instrument assumed in the Whistler Blackcomb acquisition that expires in September 2020, and as of July 31, 2017 is a C$125.0 million ($100.3 million) fixed swap on the floating interest rate on the Whistler Credit Agreement. Interest rate swap settlements and changes in estimated fair value are recognized in interest expense, net on the Consolidated Statement of Operations.
The following change in Contingent Consideration during the years ended July 31, 2017 and 2016 were as follows (in thousands):
Balance at July 31, 2015
$
6,900

Change in fair value
4,200

Balance at July 31, 2016
11,100

Change in fair value
16,300

Balance at July 31, 2017
$
27,400


The lease for Park City provides for participating contingent payments (the “Contingent Consideration”) to the landlord of 42% of the amount by which EBITDA for the Park City resort operations, as calculated under the lease, exceeds 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 future period resort operations of Park City in the calculation of EBITDA on which participating contingent payments are made, which is determined on the basis of estimated subsequent year performance, escalated by an assumed growth factor. The Company estimated the fair value of the Contingent Consideration payments using an option pricing valuation model. Key assumptions included a discount rate of 10.2%, volatility of 16.0% and future period Park City EBITDA and capital expenditures, which are unobservable inputs and thus are considered Level 3 inputs. The Company prepared a sensitivity analysis to evaluate the effect that changes on certain key assumptions would have on the estimated fair value of the Contingent Consideration. A change in the discount rate of 100 basis points or a 5% change in estimated subsequent year performance would result in a change in the estimated fair value within the range of approximately $4.5 million to $6.5 million.
The Contingent Consideration is classified as a liability in our Consolidated Balance Sheets and is remeasured to an estimated fair value at each reporting date until the contingency is resolved. During the year ended July 31, 2017, the Company increased the estimated fair value of the Contingent Consideration by $16.3 million, resulting in an estimated fair value of the Contingent Consideration of $27.4 million as of July 31, 2017, which is presented in “accounts payable and accrued liabilities” and “other long-term liabilities” in the Consolidated Balance Sheets. The increase in the estimated fair value of Contingent Consideration is primarily attributable to a change in assumptions for future period EBITDA of Park City.