Fair Value Measurements

3 Months Ended

Oct. 31, 2019

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, other current assets and Contingent Consideration measured at estimated fair value (all other assets and liabilities measured at fair value are immaterial) (in thousands).

	Estimated Fair Value Measurement as of October 31, 2019
Description	Total		Level 1		Level 2		Level 3
Assets:
Money Market	$	3,047	$	3,047	$	—	$	—
Commercial Paper	$	2,401	$	—	$	2,401	$	—
Certificates of Deposit	$	7,932	$	—	$	7,932	$	—
Liabilities:
Contingent Consideration	$	21,900	$	—	$	—	$	21,900
	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
	Estimated Fair Value Measurement as of October 31, 2018
Description	Total		Level 1		Level 2		Level 3
Assets:
Money Market	$	3,026	$	3,026	$	—	$	—
Commercial Paper	$	2,401	$	—	$	2,401	$	—
Certificates of Deposit	$	10,836	$	—	$	10,836	$	—
Liabilities:
Contingent Consideration	$	23,033	$	—	$	—	$	23,033

The Company’s cash equivalents and other current assets 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, 2019 and 2018 were as follows (in thousands):

Balance as of July 31, 2019 and 2018, respectively	$	27,200		$	21,900
Payments	(6,436		)	(67		)
Change in estimated fair value	1,136			1,200
Balance as of October 31, 2019 and 2018, respectively	$	21,900		$	23,033

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 11.15%, volatility of 17.0% and future period Park City EBITDA, 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 $3.9 million to $5.6 million.

Contingent Consideration is classified as a liability, which is remeasured to fair value at each reporting date until the contingency is resolved. During the three months ended October 31, 2019, the Company made a payment to the landlord for Contingent Consideration of approximately $6.4 million and recorded an increase of approximately $1.1 million primarily related to the estimated Contingent Consideration payment for the fiscal year ending July 31, 2019. These changes resulted in an estimated fair value of the Contingent Consideration of approximately $21.9 million, which is reflected in other long-term liabilities in the Company’s Consolidated Condensed Balance Sheet.