Fair Value Measurements

3 Months Ended

Oct. 31, 2015

The Financial Accounting Standards Board 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 October 31, 2015
Description	Balance at October 31, 2015		Level 1		Level 2		Level 3
Description	Balance at October 31, 2015		Level 1		Level 2		Level 3
Assets:
Commercial Paper	$	2,401	$	—	$	2,401	$	—
Certificates of Deposit	$	2,901	$	—	$	2,901	$	—

Liabilities:
Contingent Consideration	$	6,900	$	—	$	—	$	6,900

	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

	Fair Value Measurement as of October 31, 2014
Description	Balance at October 31, 2014		Level 1		Level 2		Level 3
Assets:
Money Market	$	8,391	$	8,391	$	—	$	—
Commercial Paper	$	1,770	$	—	$	1,770	$	—
Certificates of Deposit	$	3,530	$	—	$	3,530	$	—

Liabilities:
Contingent Consideration	$	6,000	$	—	$	—	$	6,000

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 changes in Contingent Consideration during the three months ended October 31, 2015 and 2014 were as follows (in thousands):



Balance as of July 31, 2015 and 2014, respectively	$	6,900	$	10,500
Change in fair value	—		(4,500		)
Balance as of October 31, 2015 and 2014, respectively	$	6,900	$	6,000

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 "Contingent Consideration"). The 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 Mountain Resort. The Company estimated the fair value of the Contingent Consideration payments using an option pricing valuation model. As of October 31, 2015, key assumptions included a discount rate of 11.5%, 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 fair value at each reporting date until the contingency is resolved. During the three months ended October 31, 2015, the Company did not record a change in the estimated fair value of the participating contingent payments. The estimated fair value of the contingent consideration is $6.9 million as of October 31, 2015, and this liability is recorded in other long-term liabilities in the Consolidated Condensed Balance Sheets.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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