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Fair Value Measurements
 12 Months Ended
Jul. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The Company utilizes 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, other current assets, Interest Rate Swaps and Contingent Consideration measured at their estimated fair values (all other assets and liabilities measured at fair value are immaterial) (in thousands):
 
Estimated Fair Value Measurement as of July 31, 2020
Description
Total
Level 1
Level 2
Level 3
Assets:
 
 
 
 
Money Market
$
203,158

$
203,158

$
—

$
—

Commercial Paper
$
2,401

$
—

$
2,401

$
—

Certificates of Deposit
$
8,208

$
—

$
8,208

$
—

Liabilities:
 
 
 
 
Interest Rate Swaps
$
22,510

$
—

$
22,510

$
—

Contingent Consideration
$
17,800

$
—

$
—

$
17,800

 
 
 
 
 
 
Estimated Fair Value Measurement as of July 31, 2019
Description
Total
Level 1
Level 2
Level 3
Assets:
 
 
 
 
Money Market
$
3,043

$
3,043

$
—

$
—

Commercial Paper
$
2,401

$
—

$
2,401

$
—

Certificates of Deposit
$
7,871

$
—

$
7,871

$
—

Liabilities:
 
 
 
 
Contingent Consideration
$
27,200

$
—

$
—

$
27,200


The Company’s cash equivalents, other current assets and Interest Rate Swaps are measured utilizing quoted market prices or pricing models whereby all significant inputs are either observable or corroborated by observable market data. During the year ended July 31, 2020, the Company entered into the Interest Rate Swaps to hedge the LIBOR-based variable interest rate component of $400.0 million in principal amount of its Vail Holdings Credit Agreement. Changes in the estimated fair value are recognized in change in estimated fair value of hedging instruments on the Company’s Consolidated Statements of Comprehensive Income. Such amounts are reclassified into interest expense, net from other comprehensive income during the period in which the hedged item affects earnings. The estimated fair value of the Interest Rate Swaps are included within other long-term liabilities on the Company’s Consolidated Balance Sheet as of July 31, 2020.
The changes in Contingent Consideration during the years ended July 31, 2020 and 2019 were as follows (in thousands):
 
Contingent Consideration
Balance at July 31, 2018
$
21,900

Payment
(67
)
Change in estimated fair value
5,367

Balance at July 31, 2019
27,200

Payment
(6,436
)
Change in estimated fair value
(2,964
)
Balance at July 31, 2020
$
17,800


The Lease for Park City, as discussed in Note 6, Long-term Debt, 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 performance for the years ending July 31, 2021 and July 31, 2022, escalated by an assumed long-term growth factor and discounted to net present value. The Company estimated the fair value of the Contingent Consideration payments using an option pricing valuation model. Key assumptions included Park City EBITDA for the year ending July 31, 2022, an assumed long-term growth rate, a discount rate of 10.49% and volatility of 17.0%, 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 future performance would result in a change in the estimated fair value within the range of approximately $2.9 million to $4.1 million.
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, 2020, the Company made a payment to the landlord for Contingent Consideration of approximately $6.4 million and recorded a decrease in the estimated fair value of approximately $3.0 million primarily related to changes in the expected Contingent Consideration payments for the year ended July 31, 2020 and the year ending July 31, 2021, and other key assumptions noted above, resulting in an estimated fair value of the Contingent Consideration of $17.8 million as of July 31, 2020, which is reflected in accounts payable and accrued liabilities and other long-term liabilities in the Consolidated Balance Sheet.