On February 20, 2018 (merger date), Deltic merged into Portland Merger, LLC, a wholly-owned subsidiary of Potlatch Corporation. Deltic owned approximately 530,000 acres of timberland, operated two sawmills, a medium density fiberboard facility (MDF) and was engaged in real estate development primarily in Arkansas. The merger creates a combined company with a diversified timberland base of approximately 1.9 million acres, including approximately 930,000 acres in Arkansas. It uniquely positions us to expand our integrated model of timberland ownership and lumber manufacturing, provide tax savings on Deltic’s timber harvest earnings and increase our exposure to the Texas housing market.

Under the merger agreement, each issued and outstanding share of Deltic common stock was exchanged for 1.80 shares of Potlatch common stock, with cash paid in lieu of any fractional shares. Upon consummation of the merger, all outstanding Deltic stock options (which fully vested as of the merger date) and restricted stock units (RSUs) were converted into Potlatch RSUs, after giving effect to the 1.80 exchange ratio. Because the Deltic stock options were fully vested and relate to services rendered to Deltic prior to the merger, the replacement stock options were also fully vested, and their fair value is included in the consideration transferred. A portion of the replacement RSUs relate to services to be performed post-merger and therefore are not included in consideration transferred. See additional details about replacement share-based payment awards in Note 17: Equity-Based Compensation Plans.

The following table summarizes the total consideration transferred in the merger:

(Dollars in thousands, except share and per share amounts)
Number of shares of Deltic common stock outstanding¹		12,121,223
Number of Deltic performance awards²		90,515
		12,211,738
Exchange ratio³		1.80
Potlatch shares issued		21,981,128
Price per Potlatch common share⁴	$	51.95
Aggregate value of Potlatch common shares issued	$	1,141,920
Cash paid in lieu of fractional shares	14
Fair value of stock options and RSUs⁵	841
Consideration transferred	$	1,142,775

¹	Number of shares of Deltic common stock issued and outstanding as of February 20, 2018, net of fractional shares.

²	Number of shares of Deltic performance awards for pre-combination services rendered that vested upon closing of the merger.

³	Exchange ratio per the merger agreement.

⁴	Closing price of Potlatch common shares on February 20, 2018.

⁵	Fair value of Deltic stock options for pre-combination services rendered that vested upon closing of the merger, as well as RSUs for pre-combination services rendered.

We expensed approximately $22.1 million and $3.4 million of merger-related costs during the year-ended December 31, 2018 and 2017, respectively. See Note 18: Merger, Integration and Other Costs for the components of merger-related costs. These costs are included in Deltic merger-related costs in our Consolidated Statements of Income.

The amount of revenue and income before income taxes from acquired Deltic operations included in our Consolidated Statement of Income for February 21, 2018 through December 31, 2018 are as follows:

The following summarizes unaudited pro forma information that presents combined amounts as if this merger occurred at the beginning of 2017:

Pro forma net earnings attributable to PotlatchDeltic common shareholders excludes $27.6 million and $16.8 million of non-recurring merger-related costs incurred by both companies during the year-ended December 31, 2018 and 2017, respectively, of which $18.9 million were incurred by Deltic prior to the merger.

Pro forma basic and diluted earnings per share assumes issuance of 22.0 million shares that were issued at the merger date and the issuance of 4.8 million shares for the Deltic earnings and profits special distribution as of the beginning of 2017. Refer to Note 4: Earnings Per Share. Pro forma data may not be indicative of the results that would have been obtained had these events occurred at the beginning of the periods presented, nor is it intended to be a projection of future results.

Potlatch Corporation accounted for the merger transaction as the acquirer and has applied the acquisition method of accounting. Our December 31, 2018 Consolidated Balance Sheet includes the assets and liabilities of Deltic assumed by us and have been measured at estimated fair value as of the merger date. The estimated fair values of the assets acquired and liabilities assumed were determined using the income, cost and market approaches, as applicable. The estimated fair value measurements were generally based on significant estimates and assumptions that are not observable in the market and thus represent Level 3 measurements as defined in ASC 820, Fair Value Measurements and Disclosures, except for certain long-term debt instruments assumed in the merger that were valued using observable market inputs and determined to be Level 2 measurements. The income approach and cost approach were primarily used to value acquired timber and timberlands. The income approach was primarily used to value the intangible assets and the acquired real estate held for development and sale. The income approach estimates fair value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flows are discounted at estimated rates of return that reflect the relative risk of achieving the cash flows and the time value of money. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was also used, as appropriate, for property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation. The market approach estimates fair value for an asset based on values of recent comparable transactions to provide further support for the values determined in the income and cost approaches.

The following table summarizes the estimated fair value measurements of assets acquired and liabilities assumed as of the merger date including measurement period adjustments identified:

(Dollars in thousands)	February 20, 2018		Measurement Period Adjustments			As Adjusted February 20, 2018
ASSETS
Cash and cash equivalents	$	3,419	$	—		$	3,419
Customer receivables		12,709		—			12,709
Inventories		17,316		—			17,316
Other current assets		8,276		(2,991	)		5,285
Real estate held for development and sale		79,000		4,000			83,000
Property, plant and equipment		265,901		(5,132	)		260,769
Timber and timberlands		1,060,000		(4,255	)		1,055,745
Mineral rights		—		6,236			6,236
Trade name and customer relationships intangibles		19,000		500			19,500
Other long-term assets		2,010		1,546			3,556
Total assets acquired		1,467,631		(96	)		1,467,535
LIABILITIES
Accounts payable and accrued liabilities		12,604		11			12,615
Long-term debt		229,968		144			230,112
Pension and other postretirement employee benefits		36,909		—			36,909
Deferred tax liabilities, net		44,439		(251	)		44,188
Other long-term liabilities		936		—			936
Total liabilities assumed		324,856		(96	)		324,760
Net assets acquired	$	1,142,775	$	—		$	1,142,775

As a result of these adjustments, during the year-ended ended December 31, 2018 we recorded approximately $0.1 million of additional depreciation, depletion and amortization expense as measurement period adjustments.