Acadian Timber : Annual Report (Acadian Annual Report 2025 VF 1)

About this update from Acadian Timber Corp.

Acadian Timber | 0 2025 ANNUAL REPORT 2025 ANNUAL REPORT Acadian Timber Corp. ("Acadian" or the "Company") is one of the largest timberland owners in Eastern Canada and the Northeastern U.S. and has a total of approximately 2.4 million acres of land under management. Acadian owns and manages approximately 775,000 acres of freehold timberlands in New Brunswick and approximately 300,000 acres of freehold timberlands in Maine and provides timber services relating to approximately 1.3 million acres of Crown licensed timberlands in New Brunswick. Acadian's primary business is forest management and the production of timber products, including softwood and hardwood sawlogs, pulpwood, and biomass by-products, sold to approximately 85 regional customers. Acadian also generates income through other operations, including real estate and environmental solutions. Acadian's business strategy is to maximize cash flows from its existing timberland assets through sustainable forest management and other land use activities while growing its business by acquiring assets and actively managing these assets to drive improved performance. ACADIAN'S LOCATIONS FOREST AREAS ACRES HECTARES MAINE TIMBERLANDS 300,000 121,000 NEW BRUNSWICK TIMBERLANDS 775,000 313,000 CROWN LANDS UNDER MANAGEMENT 1,326,000 537,000 AREA UNDER MANAGEMENT 2,401,000 971,000 ACADIAN'S TIMBER PRODUCT MIX BY END USE* Acadian sells a wide variety of timber products to a broad group of customers. Acadian's greatest exposure is to softwood sawlogs; however, markets for hardwood sawlogs, hardwood and softwood pulpwood, and biomass diversify our sales. SOLID WOOD 68% Softwood Dimension Lumber 55% Hardwood Lumber 8% Hardwood Specialty Products 5% PACKAGING, TISSUE & SPECIALTY PAPER 18% ENGINEERED WOOD PRODUCTS 6% PULP 6% FUEL 2% *Percentage of log sales by value for the year ended December 31, 2025 2025 HIGHLIGHTS Generated total sales of $87.0 million, Adjusted EBITDA 1 of $15.8 million, Free Cash Flow 1 of $6.6 million and net income of $49.0 million, despite challenging end-use markets Declared dividends to shareholders of $20.9 million, or $1.16 per share Established internal logging operations in Maine to address contractor capacity challenges Successfully renewed Sustainable Forestry Initiative® certification FINANCIAL HIGHLIGHTS Years Ended December 31 (CAD thousands, except where indicated) 2025 2024 2023 Timber sales volume (000s m 3 ) 996.2 977.2 894.2 Carbon credit sales volume (000s credits) - 752.1 1.5 Timber sales and services $ 86,956 $ 91,597 $ 93,440 Carbon credit sales $ - $ 24,588 $ 37 Adjusted EBITDA 1 $ 15,766 $ 38,893 $ 20,586 Free Cash Flow 1 $ 6,635 $ 29,733 $ 14,999 Net income $ 48,973 $ 21,738 $ 29,434 1. Adjusted EBITDA and Free Cash Flow are key performance measures in evaluating Acadian's operations and are important in enhancing investors' understanding of the Company's operating performance. Adjusted EBITDA is indicative of the underlying profitability of Acadian's operating segments and is used to evaluate operational performance. Free Cash Flow is used to evaluate Acadian's ability to generate sustainable cash flows from operations that are available for dividends, repurchases of common shares, debt reduction, acquisitions, and other capital allocation activities. Acadian's management defines Adjusted EBITDA as net income before interest, income taxes, fair value adjustments, non-cash cost of sales related to carbon credits, recovery of or impairment of land and roads and depreciation and amortization. Free Cash Flow is defined as Adjusted EBITDA less interest paid, current income tax expense, and capital expenditures excluding acquisitions of timberlands, plus net proceeds from the sale of timberlands and other fixed assets (proceeds less gains or losses). As these performance measures do not have standardized meanings prescribed by International Financial Reporting Standards, they may not be comparable to similar measures presented by other companies. Please refer to Management's Discussion and Analysis for further details. TABLE OF CONTENTS 3 LETTER TO SHAREHOLDERS 60 CORPORATE GOVERNANCE 6 MANAGEMENT'S DISCUSSION AND ANALYSIS 61 BOARD AND MANAGEMENT 31 CONSOLIDATED FINANCIAL STATEMENTS 61 CORPORATE AND SHAREHOLDER INFORMATION LETTER TO SHAREHOLDERS Overview Acadian Timber Corp.'s ("Acadian", or the "Company") operations and financial results for the year ended December 31, 2025 reflected a mix of strong performance and operational challenges. Our New Brunswick operations delivered solid results supported by increased contractor availability. Meanwhile, our Maine operations faced unfavourable weather conditions in the first half of the year and productivity constraints, including limited trucking capacity. Demand for our timber products was mixed but generally stable, despite heightened economic uncertainty, underscoring the resilience of Northeast regional log markets. Timber pricing softened modestly but remained relatively stable over the year. Continued Commitment to Safety and the Environment Acadian's commitment to health and safety is our top priority as we believe that emphasizing and achieving a good safety record is a leading indicator of success in the broader business. During 2025, six recordable safety incidents occurred among employees and contractors, most of which were minor and resulted in minimal lost time. Incident reduction will be a primary focus for 2026. Both the New Brunswick and Maine operations completed annual surveillance audits under the 2022 Standard of the Sustainable Forest Initiative® with no non-conformances; a testament to the sustainability of our operations. Financial Performance Revenue from timber sales and services was $87.0 million in 2025, compared to $91.6 million in the prior year, with consistent year-over-year sales volumes offset by lower timber services activity and a slightly lower weighted average selling price. The sale of 752,100 voluntary carbon credits contributed an additional $24.6 million to total sales in 2024 while no sales of carbon credits occurred in 2025. The Company's Adjusted EBITDA 2 totaled $15.8 million in 2025, compared to $38.9 million during 2024, with $19.8 million of the change being attributable to the sale of carbon credits in 2024. Acadian declared dividends to its shareholders of $20.9 million, or $1.16 per share, and generated Free Cash Flow 2 of $6.6 million. Timber sales and services Demand for softwood sawlogs was steady in the regions in which Acadian operates. Softwood sawlog pricing remained consistent with 2024, supported by modest improvement in softwood lumber markets. Softwood pulpwood demand was also steady with slightly lower pricing attributable to lower fuel adjustment surcharges stemming from lower fuel prices. Weakness in hardwood lumber markets continued to put downward pressure on hardwood sawlog prices; however, demand for Acadian's hardwood sawlogs remained stable. Hardwood pulpwood demand softened due to tariff-related uncertainty, contributing to a modest decrease in pricing over the year. In New Brunswick, changes in product mix, harvesting treatments and lower fuel adjustment costs reduced variable costs. In Maine, production constraints resulted in higher average operating costs and expenses per m 3 produced. Environmental Solutions 1 After selling nearly all of our registered voluntary carbon credits in 2024, we expect to replenish inventories in the near term. Acadian's ongoing project in Maine is currently being transitioned to Version 2.1 of ACR's Improved Forest Management protocol. Carbon credits assessed using the new protocol will be carbon removal credits which are expected to be more appealing to customers. The registration of the next tranche of carbon credits under the new protocol is expected to generate approximately 0.4 million credits. This project has provided valuable experience to the Acadian management team and has formed the foundation for potential carbon credit developments in the future. Internal Harvesting Operations 1 During 2025, Acadian established its own internal logging operations. This occurred through two initiatives. In January 2025, Acadian purchased several pieces of harvesting equipment and hired equipment operators to conduct harvesting operations on Acadian's Maine Timberlands. On February 28, 2025, Acadian acquired certain logging and related assets of A & A Brochu, LLC and its affiliates for total cash consideration of $6.9 million. The assets include harvesting, trucking and road working equipment and related real estate which, combined with an established workforce, constitute an operational logging business which has operated on our land base for many years. Although some operations will continue to be performed by external contractors in Maine, these initiatives represent a significant transition away from contracted logging operations in Maine. As these operations are developed, we expect to expand our production capacity and reduce our operating costs in Maine. Outlook 1 Near-term pressures on end-use markets have continued, with trade policy developments adding further complexity for forest products companies in both the U.S. and Canada. The escalation of U.S. duties on Canadian softwood lumber, along with tariffs on select wood-based products, poses a potential risk to Canadian exporters and may dampen cross-border demand. Despite these headwinds, macroeconomic indicators remain supportive. North American interest rates are easing, and the consensus forecast for U.S. housing starts is steady at approximately 1.38 million starts in 2026, compared to 1.35 million in 2025. We remain confident that the stability of the northeastern forestry sector, combined with long-term demand for new homes and repair and remodel activity, will support the long-term demand for our products. We maintained sufficient contractor availability in New Brunswick through 2025, which is expected to continue into 2026. Production from our internal harvesting operations improved during the fourth quarter of 2025 and we expect this momentum to continue through the winter, supporting further progress toward our targeted cost structure. Production levels are expected to ease somewhat in the second and third quarters of 2026, reflecting the usual spring slowdown and lower productivity of the harvest stands planned for the warmer months. Demand for Acadian's sawlogs is mainly driven by regional supply and demand. Near-term sawlog demand is expected to remain stable while pricing may remain challenged until end-use markets improve. Demand and pricing for softwood pulpwood and hardwood pulpwood is expected to remain at reduced levels in the near term. With respect to voluntary carbon credits, demand and pricing are expected to remain stable. Issuance of the next tranche of carbon credits from Acadian's current project has been delayed due to the transition to ACR's updated Improved Forest Management protocol. However, registration of additional carbon credits is anticipated in the near term, and the updated protocol is expected to improve the marketability of the resulting carbon credits. Acadian is evaluating future opportunities to develop additional projects under either the Canadian compliance protocol finalized in 2024 or voluntary protocols. Looking Ahead 1 In the face of heightened uncertainty our priorities remain clear: we will continue to lead with the highest standards in safety and environmental stewardship, pursue optimal margins across our products, and implement targeted improvements throughout the business to enhance cash flow generation and long-term value creation. A key focus for 2026 will be improving the productivity of our internal harvesting operations in Maine, while closely managing our costs. We will also continue to work closely with our contractors in both New Brunswick and Maine to achieve our harvesting objectives and meet the delivery demands of our customers. Acadian's exceptional asset base and outstanding people remain the foundation of our success, and we are well equipped to navigate changing market conditions. Grounded in our commitment to sustainable forest practices, we will continue to focus on strengthening the business and delivering long - term value for shareholders. On behalf of the Board of Directors and management of Acadian, I would like to thank all our shareholders for their ongoing support. Adam Sheparski President and Chief Executive Officer February 11, 2026 This Letter to Shareholders contains forward-looking information within the meaning of applicable Canadian securities laws that involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Please refer to the section entitled "Cautionary Statement Regarding Forward-Looking Information and Statements" in Management's Discussion and Analysis for further details. Adjusted EBITDA and Free Cash Flow are key performance measures in evaluating Acadian's operations and are important in enhancing investors' understanding of the Company's operating performance. Adjusted EBITDA is indicative of the underlying profitability of Acadian's operating segments and is used to evaluate operational performance. Free Cash Flow is used to evaluate Acadian's ability to generate sustainable cash flows from operations that are available for dividends, repurchases of common shares, debt reduction, acquisitions, and other capital allocation activities. Acadian's management defines Adjusted EBITDA as net income before interest, income taxes, fair value adjustments, non-cash cost of sales related to carbon credits, recovery of or impairment of land and roads and depreciation and amortization. Free Cash Flow is defined as Adjusted EBITDA less interest paid, current income tax expense, capital expenditures excluding acquisitions of timberlands and non-cash expenditures, and mandatory debt repayments, plus net proceeds from the sale of timberlands and other fixed assets (proceeds less gains or losses). Reference is also made to "net liquidity" which includes cash and cash equivalents and funds available under credit facilities less amounts reserved to support the minimum cash balance related to long-term debt. Please refer to the section entitled "Non-IFRS Measures" in Management's Discussion and Analysis for further details. MANAGEMENT'S DISCUSSION AND ANALYSIS (All figures in Canadian dollars unless otherwise stated) February 11, 2026 INTRODUCTION Acadian Timber Corp. ("Acadian", the "Company" or "we") is one of the largest timberland owners in Eastern Canada and the Northeastern U.S. and has a total of approximately 2.4 million acres of land under management. Acadian owns and manages approximately 775,000 acres of freehold timberlands in New Brunswick ("New Brunswick Timberlands") and approximately 300,000 acres of freehold timberlands in Maine ("Maine Timberlands") and provides timber services relating to approximately 1.3 million acres of Crown licensed timberlands in New Brunswick. Acadian's primary business is forest management and the production of timber products, including softwood and hardwood sawlogs, pulpwood, and biomass by-products, sold to approximately 85 regional customers. Acadian also generates income through other operations, including real estate and environmental solutions. Acadian's business strategy is to maximize cash flows from its existing timberland assets through sustainable forest management and other land use activities while growing its business by acquiring assets and actively managing these assets to drive improved performance. Basis of Presentation This management's discussion and analysis ("MD&A") discusses the financial condition and results of operations of the Company for the three months ended December 31, 2025 (herein referred to as the "fourth quarter") and the fiscal year ended December 31, 2025, compared to the fourth quarter and fiscal year ended December 31, 2024. The MD&A has been prepared in accordance with Form 51 - 102F1 Management's Discussion & Analysis. The MD&A is intended to provide an assessment of our performance and should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2025. Our consolidated financial statements are prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IFRS") and are expressed in Canadian dollars ("CAD") unless otherwise stated. This MD&A has been prepared based on information available as at February 11, 2026. Additional information, including the Company's Annual Information Form, is available on Acadian's website at www.acadiantimber.com and on SEDAR+ at www.sedarplus.ca . Non-IFRS Measures Throughout this MD&A, reference is made to "Adjusted EBITDA", which Acadian's management defines as net income before interest, income taxes, fair value adjustments, non-cash cost of sales related to carbon credits, recovery of or impairment of land and roads and depreciation and amortization, and to "Adjusted EBITDA margin", which is Adjusted EBITDA as a percentage of sales. Reference is also made to "Free Cash Flow", which Acadian's management defines as Adjusted EBITDA less interest paid, current income tax expense, capital expenditures excluding acquisitions of timberlands and non-cash expenditures, and mandatory debt repayments plus net proceeds from the sale of timberlands and other fixed assets (proceeds less gains or losses). Reference made to "Payout Ratio" is defined as dividends declared divided by Free Cash Flow and "Payout Ratio with DRIP" is defined as dividends paid in cash divided by Free Cash Flow. Management believes that Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow and Payout Ratios are key performance measures in evaluating Acadian's operations and are important in enhancing investors' understanding of the Company's operational performance. Adjusted EBITDA and Adjusted EBITDA margin are indicative of the underlying profitability of Acadian's operating segments and are used to evaluate operational performance. Free Cash Flow is used to evaluate Acadian's ability to generate sustainable cash flows from operations that are available for dividends, repurchases of common shares, debt reduction, acquisitions, and other capital allocation activities. We have provided reconciliations of net income as determined in accordance with IFRS, to Adjusted EBITDA and Free Cash Flow in the "Adjusted EBITDA and Free Cash Flow" section of this MD&A. Reference is also made to "net liquidity" which includes cash and cash equivalents and funds available under credit facilities less amounts reserved to support the minimum cash balance related to long-term debt. As these measures do not have a standardized meaning prescribed by IFRS, they may not be comparable to similar measures presented by other companies. Internal Control over Financial Reporting Management, which includes the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in the Canadian Securities Administrators National Instrument 52-109). Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and the Chief Financial Officer and effected by the Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Management assessed the design and operation of the Company's internal control over financial reporting as of December 31, 2025, based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that, as of December 31, 2025, Acadian's internal control over financial reporting is effective. Also, management determined that there were no material weaknesses in Acadian's internal control over financial reporting as of December 31, 2025. Disclosure Controls Management, including the Chief Executive Officer and Chief Financial Officer, have evaluated the design and operation of our disclosure controls and procedures (as defined in the Canadian Securities Administrators National Instrument 52-109). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, 2025. No material weaknesses have been determined by management in Acadian's disclosure controls and procedures as of December 31, 2025. REVIEW OF ANNUAL OPERATIONS Summary of Results for the Years Ended December 31 The table below summarizes operating and financial data for Acadian: Years Ended December 31 (CAD thousands, except per share data and where indicated) 2025 2024 2023 Timber sales volume (000s m 3 ) 996.2 977.2 894.2 Carbon credit sales volume (000s credits) - 752.1 1.5 Timber sales and services $ 86,956 $ 91,597 $ 93,440 Carbon credit sales - 24,588 37 Operating income 13,316 23,659 19,566 Net income 48,973 21,738 29,434 Total assets 633,613 608,017 567,953 Total long-term debt 110,009 114,941 105,515 Adjusted EBITDA 1 $ 15,766 $ 38,893 $ 20,586 Adjusted EBITDA margin 1 18% 33% 22% Free Cash Flow 1 $ 6,635 $ 29,733 $ 14,999 Dividends declared 20,942 20,259 19,802 Dividends paid in cash 10,363 11,488 14,868 Payout Ratio 1 316% 68% 132% Payout Ratio with DRIP 1 156% 39% 99% Per share - basic and diluted Net income $ 2.70 $ 1.24 $ 1.72 Free Cash Flow 1 0.37 1.69 0.88 Book value 19.67 19.18 18.56 Dividends declared per share 1.16 1.16 1.16 Common shares outstanding 2 18,286,767 17,675,687 17,182,558 Weighted average shares outstanding 18,157,708 17,566,031 17,123,919 Non-IFRS Measure. See "Non-IFRS Measures" on page 6 of this report. As at February 11, 2026 there were 18,455,847 common shares outstanding. Acadian generated revenue from timber sales and services of $87.0 million, compared to $91.6 million in the prior year. Consistent year-over-year sales volumes, excluding biomass, from our freehold timberlands were offset by a decrease in the weighted average selling price, and lower timber services activity. The sale of 752,100 voluntary carbon credits contributed an additional $24.6 million to total sales in 2024 while no sales of carbon credits occurred in 2025. Freehold timber sales volume, excluding biomass, of 908,500 m 3 was consistent with 2024, with increased freehold sales volumes in New Brunswick offset by decreased sales volumes in Maine. New Brunswick freehold sales volume, excluding biomass, increased primarily due to increased contractor availability and a favourable change in customer mix which shifted harvesting volumes from Crown licensed timberlands to our freehold timberlands, increasing our freehold sales and decreasing our timber services revenue, as compared to 2024. Decreased sales volumes in Maine were reflective of unfavourable weather conditions in the first half of the year and limited trucking capacity, combined with short-term harvesting productivity constraints. Acadian's weighted average selling price, excluding biomass, of $78.51 decreased 4% from the prior year. Softwood sawlog pricing was consistent with the prior year period. Longer hauling distances for delivered sales and modest improvements in end use markets were partially offset by higher volumes of roadside sales and a greater proportion of sales occurring in New Brunswick, where pricing is generally lower than Maine . Hardwood sawlog pricing decreased 7% primarily due to a lower value product mix and continued weakness in lumber markets. Softwood pulpwood pricing decreased 5% year-over-year due to lower demand early in the year. Hardwood pulpwood pricing decreased 3% as compared to the prior year as a result of shorter hauling distances and lower demand. Lower fuel adjustment surcharges, resulting from lower fuel prices also impacted pricing, particularly in New Brunswick. Operating costs and expenses were $73.6 million during 2025, compared to $92.5 million in the prior year. Included in operating costs and expenses in the prior year were $18.9 million related to carbon credit sales . Operating costs and expenses related to timber sales and services were relatively consistent with 2024. Lower weighted average variable costs, excluding biomass, in New Brunswick were partially offset by higher average operating costs and expenses per m 3 produced in Maine. Adjusted EBITDA for the year ended December 31, 2025 was $15.8 million, compared to $38.9 million in the prior year, with $19.8 million of the change being attributable to Adjusted EBITDA related to the sale of carbon credits in 2024. The remaining decrease in Adjusted EBITDA, as compared to 2024, is primarily a result of lower operating income for the reasons discussed above. Adjusted EBITDA margin was 18% compared to 33% in the prior year. Free Cash Flow was $6.6 million compared to $29.7 million in 2024 due to lower Adjusted EBITDA, higher interest expense and higher mandatory debt repayments, partially offset by lower current income tax expense. Net income for the year ended December 31, 2025 totaled $49.0 million, or $2.70 per share, compared to net income of $21.7 million, or $1.24 per share, in the prior year with higher non-cash fair value adjustments in 2025 compared to 2024 offset by lower operating income, higher interest expense and higher income tax expense. Adjusted EBITDA and Free Cash Flow The following table provides a reconciliation of net income, as determined in accordance with IFRS, to Adjusted EBITDA and Free Cash Flow during each respective period: Years Ended December 31 (CAD thousands) 2025 2024 2023 Net income $ 48,973 $ 21,738 $ 29,434 Add / (deduct): Interest expense, net 4,020 3,121 3,153 Income tax expense 18,560 9,250 10,611 Depreciation and amortization 1,882 517 363 Fair value adjustments and other (57,669) (9,911) (22,995) Non-cash cost of sales related to carbon credits 2 - 14,178 20 Adjusted EBITDA 1 $ 15,766 $ 38,893 $ 20,586 Add / (deduct): Interest paid on debt, net (4,102) (3,299) (3,031) Additions to land, roads, and other fixed assets (1,016) (1,082) (619) Mandatory debt repayments (570) - - Gain on sale of timberlands and other fixed assets (568) (539) (657) Proceeds from sale of timberlands and other assets 1,194 1,360 675 Current income tax expense (4,069) (5,600) (1,955) Free Cash Flow 1 $ 6,635 $ 29,733 $ 14,999 Non-IFRS Measure. See "Non-IFRS Measures" on page 6 of this report. A portion of the book value of carbon credit inventory originates in transfers of fair value from timber and is recorded as an expense at the time of a sale. These amounts are added back to Adjusted EBITDA to be consistent with the treatment of fair value adjustments to timber. Dividend Policy of the Company Acadian declares dividends from its available cash to the extent determined prudent by the Board of Directors. Dividends are paid on or about the 15th day following each dividend record date. Total dividends declared to shareholders during the year ended December 31, 2025 were $20.9 million, or $1.16 per share, compared to $20.3 million, or $1.16 per share in 2024. The Payout Ratio of Acadian, which represents the amount of dividends declared as a percentage of the Free Cash Flow generated, was 316% for 2025, and the Payout Ratio with DRIP, which represents the amount of dividends paid in cash as a percentage of Free Cash Flow generated, was 156%. Acadian has in place a dividend reinvestment plan ("DRIP") effective with eligible shareholders whereby Canadian resident shareholders may elect to automatically have their dividends reinvested in additional shares issued directly from the treasury of the Company. During the year, Acadian issued 611,080 common shares in accordance with the DRIP. Macer Forest Holdings Inc. ("Macer"), which owns approximately 51% of the outstanding common shares of Acadian as at February 11, 2026 (December 31, 2025 - 51%), increased its participation from 50% of dividends payable to it to 100% of dividends payable to it beginning April 15, 2024. The level of future participation is subject to change, subject to the notice provisions of the DRIP. Segmented Results of Operations Acadian has three reportable segments: New Brunswick Timberlands, Maine Timberlands and Environmental Solutions. The table below summarizes financial results by segment: Year Ended December 31 (CAD thousands) 2025 2024 Sales New Brunswick Timberlands $ 76,035 $ 74,314 Maine Timberlands 10,921 17,283 Environmental Solutions - 24,588 Corporate - - Total $ 86,956 $ 116,185 Adjusted EBITDA New Brunswick Timberlands $ 19,705 $ 19,471 Maine Timberlands (2,166) 1,620 Environmental Solutions - 19,839 Corporate (1,773) (2,037) Total $ 15,766 $ 38,893 New Brunswick Timberlands New Brunswick Timberlands owns and manages approximately 775,000 acres of freehold timberlands and provides harvesting and management services relating to approximately 1.3 million acres of Crown licensed timberlands. All harvesting operations are performed by third-party contractors. For the year ended December 31, 2025, there was one recordable safety incident among contractors and none among employees. The incident was minor in nature and the individual returned to work. New Brunswick Timberlands successfully completed a surveillance audit under the 2022 Sustainable Forestry Initiative® Standard during the year with no non-conformances, which re-affirms our certificate and is a testament to the sustainability of our operations. The table below summarizes operating and financial results for New Brunswick Timberlands: Year Ended December 31 (CAD thousands) 2025 2024 Sales (000s m 3 ) Softwood 548.5 463.1 Hardwood 255.3 270.4 Biomass 81.9 60.7 Total 885.7 794.2 Sales ($000s) Softwood $ 40,160 $ 33,705 Hardwood 21,844 24,242 Biomass 1,156 1,305 Total $ 63,160 $ 59,252 Timber services and other 12,875 15,062 Total Sales ($000s) $ 76,035 $ 74,314 Adjusted EBITDA ($000s) $ 19,705 $ 19,471 Adjusted EBITDA margin 26% 26% Sales for New Brunswick Timberlands totaled $76.0 million, compared to $74.3 million in 2024 reflecting increased freehold sales volumes offset by a lower weighted average selling price and decreased timber services activity. Freehold sales volume, excluding biomass, increased 10% compared to the prior year primarily due to increased contractor availability and a favourable change in customer mix which shifted harvesting volumes from Crown licensed timberlands to our freehold timberlands, increasing our freehold sales and decreasing our timber services revenue. Biomass sales volume was higher compared to the prior year due to increased processing capacity. The weighted average selling price, excluding biomass, for the year was $77.14 per m 3 , or 2% lower year-over-year. Softwood sawlog pricing increased 3% compared to the prior year period, due to a higher value product mix, longer hauling distances and modest improvements in end use markets. Hardwood sawlog pricing decreased 6% primarily due to a lower value product mix and continued weakness in lumber markets. Softwood pulpwood pricing decreased 3% year-over-year due to lower demand early in the year. Hardwood pulpwood pricing also decreased 3% as compared to the prior year period as a result of shorter hauling distances and lower demand. Lower fuel adjustment surcharges, resulting from lower fuel prices also impacted pricing. Operating costs and expenses were $56.8 million during 2025, compared to $55.5 million in the prior year. Increased freehold harvesting activity was partially offset by decreased weighted average variable costs and lower timber services activity. Weighted average variable costs, excluding biomass, decreased 5% as a result of a higher proportion of softwood products which carry lower variable costs, lower harvesting costs associated with the harvesting treatment applied, and lower fuel adjustment costs. Adjusted EBITDA for the year ended December 31, 2025 was $19.7 million, compared to $19.5 million in the prior year, while Adjusted EBITDA margin was 26%, consistent with the prior year. Maine Timberlands Maine Timberlands owns and manages approximately 300,000 acres of freehold timberlands. For the year ended December 31, 2025, there were five recordable safety incidents among employees and none among contractors. The individuals made full recoveries and returned to work. Internal Logging Operations 1 Prior to January 1, 2025, all harvesting operations in Maine were performed by third-party contractors. During the first quarter of 2025, Acadian established its own internal logging operations. This occurred through two initiatives. In January 2025, Acadian purchased several pieces of harvesting equipment for $2.4 million and hired equipment operators to conduct harvesting operations on Acadian's Maine Timberlands. On February 28, 2025, Acadian acquired certain logging and related assets of A & A Brochu, LLC ("A & A Brochu") and its affiliates for total cash consideration of $6.9 million. The assets include harvesting, trucking and road working equipment and related real estate which, combined with an established workforce, constitute a portion of A & A Brochu's logging operation in Maine. Recognized amounts of assets acquired from A & A Brochu are as follows: (CAD thousands) Equipment $ 5,271 Land and buildings 1,477 Intangible assets 182 Total identifiable assets acquired $ 6,930 No liabilities were assumed. Although some operations will continue to be performed by external contractors in Maine, these initiatives represent a significant transition away from contracted logging operations in Maine. During 2025, production volumes were below anticipated long-term levels, and operating costs per m 3 of timber produced were elevated by approximately 30% relative to long-term targets in the fourth quarter of 2025. Additionally, the transition to a more fixed cost structure has resulted in changes from historical cost patterns, with costs less directly tied to revenue generated. During the third quarter of 2025, we expanded the workforce within our internal harvesting operations and production levels notably improved in the fourth quarter. Acadian is actively investing in operator training programs and optimizing equipment utilization to support this strategic shift. These efforts are designed to enhance efficiency, build long-term capabilities, and ensure sustained cost improvements. As internal operations continue to scale, Acadian expects to increase production capacity and drive greater cost efficiency in Maine. Our Maine operations successfully completed a surveillance audit under the 2022 Sustainable Forestry Initiative® Standard during the year with no non-conformances. ‌ 1 The following contains forward-looking information about Acadian Timber Corp.'s outlook. Reference should be made to the section entitled "Cautionary Statement Regarding Forward-Looking Information and Statements" for further details. For a description of material factors that could cause actual results to differ materially from the forward-looking information in the following, please see the Risk Factors section of Acadian's most recent Annual Report and Annual Information Form available on our website at www.acadiantimber.com or www.sedarplus.ca. The table below summarizes operating and financial results for Maine Timberlands: Year Ended December 31 (CAD thousands) 2025 2024 Sales (000s m 3 ) Softwood 64.2 103.0 Hardwood 40.5 71.8 Biomass 5.8 8.2 Total 110.5 183.0 Sales ($000s) Softwood $ 5,788 $ 9,589 Hardwood 3,536 6,333 Biomass 149 182 Total $ 9,473 $ 16,104 Other sales 1,448 1,179 Total Sales ($000s) $ 10,921 $ 17,283 Adjusted EBITDA ($000s) $ (2,166) $ 1,620 Adjusted EBITDA margin (20)% 9% Sales for Maine Timberlands were $10.9 million compared to $17.3 million in 2024. Sales volume, excluding biomass, decreased 40%. The decrease in volumes year-over-year is reflective of unfavourable weather conditions in the first half of the year and limited trucking capacity, as some trucking operations continue to be performed by external contractors, combined with the short-term harvesting productivity constraints previously noted. The weighted average selling price, excluding biomass, in Canadian dollar terms was $88.98 per m 3 , compared to $91.09 per m 3 in 2024. In U.S. dollar terms, the weighted average selling price, excluding biomass, was $63.74 per m 3 , compared to $66.70 per m 3 in 2024. Softwood sawlog pricing decreased 7% in U.S. dollars terms, compared to the prior year period, as a result of the incurrence of stumpage sales, which did not occur in 2024, and increased roadside sales. Excluding stumpage sales, softwood sawlog pricing decreased 2% in U.S. dollar terms. Hardwood pulpwood pricing decreased 5% due to lower demand. Hardwood sawlog and softwood pulpwood volumes were minimal during the year. Operating costs and expenses for 2025 were $14.9 million, compared to $16.0 million in 2024. Decreased costs resulting from lower timber sales volumes were partially offset by higher average operating costs and expenses per m 3 produced. Adjusted EBITDA for the year ended December 31, 2025 was $(2.2) million compared to $1.6 million in the prior year and Adjusted EBITDA margin was (20)% compared to 9% during the prior year. Environmental Solutions 2 Environmental Solutions leverages the ecological functions of Acadian's land and the operational expertise of its team to address pressing environmental challenges, such as climate change and biodiversity. In line with these objectives, Acadian has undertaken a voluntary carbon credit project which increases carbon sequestration and provides significant environmental benefits on the portion of our Maine Timberlands that is subject to a working forest conservation easement. The project is registered on the ACR under the name Anew - Katahdin Forestry Project, and requires balancing harvest and growth, long-term planning, periodic carbon inventory verification, and maintenance of the Acadian's sustainable forestry certification. ‌ 2 The following contains forward-looking information. Reference should be made to the section entitled "Cautionary Statement Regarding Forward-Looking Information and Statements" for further details. For a description of material factors that could cause actual results to differ materially from the forward-looking information in the following, please see the Risk Factors section of this MD&A and our Annual Information Form available on our website at www.acadiantimber.com or www.sedarplus.ca. During 2024, 752,100 carbon credits were sold. No sales occurred during 2025. The table below summarizes operating and financial results for Environmental Solutions: Year Ended December 31 (CAD thousands) 2025 2024 Sales v olume (000s credits) - 752.1 Sales ($000s) $ - $ 24,588 Adjusted EBITDA ($000s) $ - $ 19,839 The ACR has developed Version 2.1 of the Improved Forest Management protocol, which is fundamentally the same approach as the previous protocol but introduces dynamic baselines. Carbon credits assessed using the new protocol are expected to be more appealing to customers. Acadian's project is currently being transitioned to the new protocol, which has resulted in a delay in the registration process for the next tranche of carbon credits for the project. Registration is expected in the near term. The transition to the new protocol may result in slightly fewer total carbon credits being issued than was expected under the initial protocol. However, all credits generated are expected to be carbon removal credits, and no conservation credits will be generated. Actual credit issuances will be adjusted each reporting period based on actual harvesting, natural disturbances, and other factors, as well as periodic updating for inventory and verification activities. This project has provided valuable experience to the Acadian management team and has formed the foundation for potential carbon credit developments in the future. ANALYSIS OF FOURTH QUARTER RESULTS Summary of Fourth Quarter Results The table below summarizes operating and financial data for Acadian: Three Months Ended December 31 (CAD thousands, except where indicated) 2025 2024 2023 Timber sales volume (000s m 3 ) 277.5 232.3 231.9 Carbon credit sales volume (000s credits) - - 1.5 Timber sales and services $ 21,976 $ 20,226 $ 23,778 Carbon credit sales - - 37 Operating income 4,241 3,215 4,312 Net income 39,720 5,585 11,593 Adjusted EBITDA 1 5,164 3,698 4,418 Adjusted EBITDA margin 1 23% 18% 19% Free Cash Flow 1 $ 1,860 $ 3,051 $ 2,811 Dividends declared 5,303 5,126 4,983 Dividends paid in cash 2,589 2,588 3,702 Per share - basic and diluted Net income 2.18 0.32 0.68 Free Cash Flow 1 0.10 0.17 0.16 Dividends declared per share 0.29 0.29 0.29 Non-IFRS Measure. See "Non-IFRS Measures" on page 6 of this report During the fourth quarter, Acadian generated sales of $22.0 million compared to $20.2 million in the fourth quarter of 2024. Sales volume, excluding biomass, was 21% higher than the same period of 2024, supported by more favourable weather conditions across both operating regions. New Brunswick also experienced improved contractor availability and a favourable change in customer mix which shifted harvesting volumes from Crown licensed timberlands to our freehold timberlands, increasing freehold sales and decreasing timber services revenue. Harvested volumes increased in Maine, as compared to the same period in the prior year, but deliveries were hindered by limited trucking capacity. The weighted average selling price, excluding biomass, decreased 6% year-over-year. Softwood sawlog pricing was 2% lower than the prior year period, with a higher value product mix offset by shorter hauling distances. Hardwood sawlog pricing decreased 10% primarily due to a lower value product mix and continued weakness in lumber markets. Softwood pulpwood pricing was consistent with the prior year period, while hardwood pulpwood pricing decreased 12% due to shorter hauling distances and lower fuel adjustment surcharges. Operating costs and expenses were $17.7 million during the fourth quarter, compared to $17.0 million during the fourth quarter of 2024. Increased operating costs and expenses were due primarily to higher sales volumes and higher land management costs, partially offset by lower timber services activity. Weighted average variable costs per m 3 produced In New Brunswick decreased compared to the fourth quarter of 2024 due to a higher proportion of softwood products which carry lower variable costs, lower harvesting costs associated with the harvesting method applied, short hauling distances and lower fuel adjustment costs. Cost of sales per m 3 produced in Maine increased, as compared to the prior year period, as a result of lower production levels. Adjusted EBITDA was $5.2 million during the fourth quarter, compared to $3.7 million in the prior year period and Adjusted EBITDA margin for the quarter was 23% compared to 18% in the prior year period. Free Cash Flow was $1.9 million compared to $3.1 million in the same period of 2024 as a result of higher interest expense, debt repayments and current income tax expense combined with lower proceeds from sales of assets. Net income for the fourth quarter totaled $39.7 million, or $2.18 per share, compared to $5.6 million, or $0.32 per share in the same period of 2024. The increase in net income was largely due to the impact of higher gains on non-cash fair value adjustments in 2025 compared to 2024 partially offset by lower operating income and higher income tax expense. The following tables provide a reconciliation of net income, in accordance with IFRS, to Adjusted EBITDA and Free Cash Flow during each respective period: Three Months Ended December 31 (CAD thousands, except where indicated) 2025 2024 2023 Net income $ 39,720 $ 5,585 $ 11,593 Add / (deduct): Interest expense, net 1,086 721 778 Income tax expense 15,960 2,164 4,795 Depreciation and amortization 513 148 101 Fair value adjustments and other (52,115) (4,920) (12,869) Non-cash cost of sales related to carbon credits 2 - - 20 Adjusted EBITDA 1 $ 5,164 $ 3,698 $ 4,418 Add / (deduct): Interest paid on debt, net (1,066) (814) (793) Mandatory debt repayments (172) - - Additions to land, roads, and other fixed assets (67) (342) (69) Gain on sale of timberlands and other fixed assets (410) (335) (5) Proceeds from sale of timberlands and other fixed assets 589 1,142 5 Current income tax expense (2,178) (298) (745) Free Cash Flow 1 $ 1,860 $ 3,051 $ 2,811 Non-IFRS Measure. See "Non-IFRS Measures" on page 6 of this report. A portion of the book value of carbon credit inventory originates in transfers of fair value from timber and is recorded as an expense at the time of a sale. These amounts are added back to Adjusted EBITDA to be consistent with the treatment of fair value adjustments to timber. Segmented Results of Operations The table below summarizes operating and financial results by segment: Three Months Ended December 31 (CAD thousands) 2025 2024 Sales New Brunswick Timberlands $ 19,020 $ 17,222 Maine Timberlands 2,956 3,004 Environmental Solutions - - Corporate - - Total $ 21,976 $ 20,226 Adjusted EBITDA New Brunswick Timberlands $ 5,487 $ 4,168 Maine Timberlands (53) (223) Environmental Solutions - - Corporate (270) (247) Total $ 5,164 $ 3,698 New Brunswick Timberlands During the fourth quarter, Acadian's New Brunswick operations experienced no recordable safety incidents among contractors or employees. The table below summarizes operating and financial results for New Brunswick Timberlands: Three Months Ended December 31 (CAD thousands) 2025 2024 Sales (000s m 3 ) Softwood 160.5 108.7 Hardwood 51.0 62.7 Biomass 33.7 28.4 Total 245.2 199.8 Sales ($000s) Softwood $ 11,701 $ 7,777 Hardwood 4,046 5,739 Biomass 399 359 Total $ 16,146 $ 13,875 Timber services and other sales 2,874 3,347 Total Sales ($000s) $ 19,020 $ 17,222 Adjusted EBITDA ($000s) $ 5,487 $ 4,168 Adjusted EBITDA margin 29% 24% Sales for New Brunswick Timberlands were $19.0 million compared to $17.2 million during the prior year period. Freehold sales volume, excluding biomass, increased 23% compared to the prior year period primarily due to increased contractor availability and a favourable change in customer mix which shifted harvesting volumes from Crown licensed timberlands to our freehold timberlands, increasing our freehold sales and decreasing our timber services revenue. Favourable weather conditions further supported sales volumes. The weighted average selling price, excluding biomass, for the fourth quarter was $74.48 per m 3 , or 6% lower than the prior year period. Softwood sawlog pricing was consistent with the prior year period, with a higher value product mix offset by shorter hauling distances. Hardwood sawlog pricing decreased 12% primarily due to a lower value product mix and continued weakness in lumber markets. Softwood pulpwood pricing was consistent with the prior year period, while hardwood pulpwood pricing decreased 13% due to shorter hauling distances and lower fuel adjustment surcharges. Operating costs and expenses were $13.6 million during the fourth quarter, compared to $13.4 million in the prior year period. Additional costs related to increased freehold harvesting activity were offset by lower timber services activity and decreased weighted average variable costs, as compared to the fourth quarter of 2024. Weighted average variable costs, excluding biomass, decreased 15% compared to the fourth quarter of 2024 due to a higher proportion of softwood products which carry lower variable costs, lower harvesting costs associated with harvesting method applied, short hauling distances and lower fuel adjustment costs. Adjusted EBITDA for the quarter was $5.5 million compared to $4.2 million during the prior year period and Adjusted EBITDA margin was 29% compared to 24% as a result of higher operating income for the reasons discussed above. Maine Timberlands During the fourth quarter, Acadian's Maine operations experienced no recordable safety incidents among contractors or employees. The table below summarizes operating and financial results for Maine Timberlands: Three Months Ended December 31 (CAD thousands) 2025 2024 Sales (000s m 3 ) Softwood 20.0 18.7 Hardwood 10.8 10.8 Biomass 1.5 3.0 Total 32.3 32.5 Sales ($000s) Softwood $ 1,649 $ 1,695 Hardwood 872 917 Biomass 36 82 Total $ 2,557 $ 2,694 Other sales 399 310 Total Sales ($000s) $ 2,956 $ 3,004 Adjusted EBITDA ($000s) $ (53) $ (223) Adjusted EBITDA margin (2)% (7)% Sales for Maine Timberlands during the fourth quarter totaled $3.0 million, consistent with the prior year period. Sales volume, excluding biomass, increased 5% compared to the same period of 2024. Harvested volumes increased, as compared to the same period in the prior year, supported by more favourable weather conditions, but deliveries were hindered by limited trucking capacity. The weighted average selling price, excluding biomass, was $58.25 per m 3 in U.S dollar terms, and $81.10 per m 3 in Canadian dollar terms, both 8% lower than the same period of 2024, primarily due to stumpage sales. Excluding stumpage sales, t he weighted average selling price, excluding biomass, increased 3%. Softwood sawlog pricing decreased 12% as compared to the prior year period as a result of the incurrence of stumpage sales, which did not occur in the fourth quarter of 2024, and increased roadside sales, partially offset by a higher value product mix. Excluding stumpage sales, softwood sawlog pricing increased 6%. Hardwood pulpwood pricing decreased 6% due to lower demand. Hardwood sawlog and softwood pulpwood volumes were minimal during the quarter. Operating costs and expenses for the fourth quarter were $3.8 million, compared to $3.3 million during the same period in 2024 as a result of higher average operating costs and expenses per m 3 produced. Adjusted EBITDA for the quarter was $(0.1) million, compared to $(0.2) million in the prior year period and Adjusted EBITDA margin was (2)% compared to (7)% in the prior year period. Decreased operating income was offset by higher gains on sale of timberlands and other fixed assets. Environmental Solutions There were no carbon credit sales in the fourth quarter of 2025 and no carbon credit sales in the fourth quarter of 2024. See additional disclosure within "Environmental Solutions" under the heading "Review of Annual Operations". LIQUIDITY AND CAPITAL RESOURCES Liquidity Acadian's principal sources of liquidity include cash earned from operations and existing revolving credit facilities. These sources, combined with existing cash, are expected to allow the Company to meet its short-term and long-term operating, debt service, capital expenditure and dividend requirements. Due to the seasonal nature of our business, it is typical that cash reserves are generated in the first, third, and fourth quarters of the year and are then drawn down during periods, such as the second quarter, when harvesting conditions are not ideal. This remains unchanged from the prior year. The Company expects to pay quarterly dividends to the extent determined prudent by the Company's Board of Directors. Acadian assesses the nature and timing of discretionary payments in an effort to mitigate any impact on the financial condition or results of operations of Acadian. The Company's implementation of a DRIP reduces the cash requirements of dividend distributions. Management will assess financing alternatives, which may include the issuance of additional shares and debt, when funding requirements such as potential acquisitions and debt maturities present themselves. Acadian had net liquidity of $17.4 million as at December 31, 2025, including funds available under the revolving facilities. Capital Resources Borrowings Acadian has term credit facilities with MetLife Insurance Company, with maturity dates ranging from March 6, 2027 to March 6, 2030. These credit facilities include a revolving credit facility of up to U.S. $10.0 million (the "Revolving Facility") for general corporate purposes and term credit facilities of U.S. $80 million (the "Term Facilities"). The Term Facilities bear interest at rates ranging from 2.7% to 5.3%. The Revolving Facility bears interest at floating rates based on the Secured Overnight Financing Rate plus applicable margin. Floating interest rates give rise to interest rate risk as net income and cash flows may be negatively impacted by fluctuations in interest rates. There are no scheduled repayments of principal required prior to the maturity dates of the Term Facilities. On March 6, 2025, U.S.$32.0 million of the term loan matured and was refinanced under essentially the same terms as the existing facilities, and with a maturity date of March 6, 2030 and an interest rate of 5.3%. As at December 31, 2025, Acadian had borrowed U.S.$80 million (December 31, 2024 - U.S. $80.0 million) under the Term Facilities and U.S. $nil (December 31, 2024 - U.S. $nil) under the Revolving Facility. U.S.$2.3 million of the Revolving Facility is reserved to support the minimum cash balance requirement of the Term Facilities. As security for these facilities, Acadian granted the lenders a security interest over the majority of its assets. The facilities are subject to customary terms and conditions for borrowers of this nature, including limits on incurring additional indebtedness and granting liens or selling assets without the consent of the lenders. The credit facilities are also subject to the maintenance of a maximum loan-to-value ratio. Acadian is in compliance with all covenants as at December 31, 2025. Acadian has a $2.0 million Canadian dollar denominated revolving credit facility with a major Canadian bank for general corporate purposes. This facility bears interest at floating rates based on bank prime rates plus applicable margin and is due on demand. No amounts were drawn on this facility as at December 31, 2025. On January 2, 2025 Acadian entered into an equipment financing agreement in the amount of U.S.$1.5 million which bears interest at 2.5% and is repayable in monthly principal and interest instalments over 3 years. The related equipment has been pledged as security. Outstanding Shares The Company is authorized to issue an unlimited number of shares of the same class with equal rights and privileges. Shareholders are entitled to receive dividends as and when declared by the Company's Board of Directors and are entitled to one vote per share on all matters to be voted on by shareholders at each meeting of shareholders. As at December 31, 2025 and February 11, 2026, Acadian had 18,286,767 and 18,455,847 common shares outstanding, respectively, and the weighted average common shares outstanding during the year was 18,157,708. As at December 31, 2025 and February 11, 2026, Macer owned 9,244,656 and 9,411,589 shares, respectively, approximately 51% and 51%, respectively, of the outstanding common shares of Acadian. Acadian has in place a DRIP as discussed within the section Dividend Policy of the Company of this MD&A. Shares issued under the DRIP are issued directly from the treasury of the Company. OUTLOOK The following contains forward-looking information about Acadian Timber Corp.'s outlook for 2026. Reference should be made to the section entitled "Cautionary Statement Regarding Forward-Looking Information and Statements" for further details. For a description of material factors that could cause actual results to differ materially from the forward-looking statements in the following, please see the Risk Factors section in this MD&A and in our Annual Information Form available on our website at www.acadiantimber.com or www.sedarplus.ca . Near-term pressures on end-use markets have continued, with trade policy developments adding further complexity for forest products companies in both the U.S. and Canada. The escalation of U.S. duties on Canadian softwood lumber, along with tariffs on select wood-based products, poses a potential risk to Canadian exporters and may dampen cross-border demand. Despite these headwinds, macroeconomic indicators remain supportive. North American interest rates are easing, and the consensus forecast for U.S. housing starts is steady at approximately 1.38 million starts in 2026, compared to 1.35 million in 2025. We remain confident that the stability of the northeastern forestry sector, combined with long-term demand for new homes and repair and remodel activity, will support the long-term demand for our products. We maintained sufficient contractor availability in New Brunswick through 2025, which is expected to continue into 2026. Production from our internal harvesting operations improved during the fourth quarter of 2025 and we expect this momentum to continue through the winter, supporting further progress toward our targeted cost structure. Production levels are expected to ease somewhat in the second and third quarters of 2026, reflecting the usual spring slowdown and lower productivity of the harvest stands planned for the warmer months. Demand for Acadian's sawlogs is mainly driven by regional supply and demand. Near-term sawlog demand is expected to remain stable while pricing may remain challenged until end-use markets improve. Demand and pricing for softwood pulpwood and hardwood pulpwood is expected to remain at reduced levels in the near term. With respect to voluntary carbon credits, demand and pricing are expected to remain stable. Issuance of the next tranche of carbon credits from Acadian's current project has been delayed due to the transition to ACR's updated Improved Forest Management protocol. However, registration of additional carbon credits is anticipated in the near term, and the updated protocol is expected to improve the marketability of the resulting carbon credits. Acadian is evaluating future opportunities to develop additional projects under either the Canadian compliance protocol finalized in 2024 or voluntary protocols. SUPPLEMENTAL INFORMATION This supplemental information contains information required by applicable continuous disclosure guidelines and is provided to facilitate additional analysis. Selected Consolidated Quarterly Information The tables below set forth selected consolidated quarterly information for the last eight quarters. See "Additional Quarterly Information" section for the segmented quarterly results. 2025 2024 (CAD thousands, except per share data and where indicated) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Timber sales volume (000s m 3 ) 277.5 260.6 191.0 266.9 232.3 287.4 210.5 247.0 Carbon credit sales volumes (000s credits) - - - - - - 600.0 152.1 Timber sales and services $ 21,976 $ 23,017 $ 17,129 $ 24,834 $ 20,226 $ 25,959 $ 21,533 $ 23,879 Carbon credit sales - - - - - - 19,658 4,930 Adjusted EBITDA 1 5,164 3,508 2,415 4,679 3,698 4,039 20,556 10,599 Free Cash Flow 1 1,860 991 777 3,010 3,051 2,540 16,370 7,770 Net income 39,720 2,928 2,667 3,659 5,585 2,215 7,913 6,025 Per share - basic and diluted $ 2.18 $ 0.16 $ 0.15 $ 0.21 $ 0.32 $ 0.13 $ 0.46 $ 0.35 1. Non-IFRS Measure. See "Non-IFRS Measures" on page 6 of this report. Results are impacted by seasonality. Harvest activity is highest during the winter months, when the ground is frozen, providing a solid base for harvesting and hauling equipment. There is a significant decrease in activity during the spring when the ground thaws. Harvesting activity resumes in late spring or early summer when the ground dries and continues through the fall. Net income can be significantly impacted by non-cash items such as fluctuations in foreign exchange and the fair value adjustment of the Company's timberlands, which are revalued at each reporting period. During the fourth quarter of 2025, Acadian recorded a fair value adjustment gain on timberlands which increased net income by $52.1 million. During the first and second quarters of 2024, Acadian sold significant volumes of voluntary carbon credits, which increased Adjusted EBITDA by $4.1 million and $15.7 million, respectively. A portion of the book value of carbon credit inventory originates in transfers of fair value from timber and is recorded as an expense at the time of a sale. These amounts are added back to Adjusted EBITDA to be consistent with the treatment of fair value adjustments to timber. This adjustment to net income to calculate Adjusted EBITDA was $2.8 million and $11.4 million during the first and second quarters of 2024, respectively. The following table provides a reconciliation of net income, as determined in accordance with IFRS, to Adjusted EBITDA and Free Cash Flow during each respective period included in the Selected Consolidated Quarterly Information above: 2025 2024 (CAD thousands) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Net income $ 39,720 $ 2,928 $ 2,667 $ 3,659 $ 5,585 $ 2,215 $ 7,913 $ 6,025 Add / (deduct): Interest expense, net 1,086 1,049 1,069 816 721 654 887 859 Income tax expense 15,960 171 906 1,522 2,164 939 3,170 2,976 Depreciation and amortization 513 552 581 236 148 139 128 102 Fair value adjustments and other (52,115) (1,192) (2,808) (1,554) (4,920) 92 (2,894) (2,189) Non-cash cost of sales related to carbon credits - - - - - - 11,352 2,826 Adjusted EBITDA 1 $ 5,164 $ 3,508 $ 2,415 $ 4,679 $ 3,698 $ 4,039 $ 20,556 $ 10,599 Add / (deduct): Interest paid on debt, net (1,066) (1,084) (1,055) (897) (814) (764) (892) (829) Mandatory debt repayments (172) (178) (166) (54) - - - - Additions to land, roads and other fixed assets (67) (149) (258) (542) (342) (292) (320) (128) Gain on sale of timberlands and other fixed assets (410) - (136) (22) (335) (1) (129) (73) Proceeds from sale of timberlands and other assets 589 19 163 423 1,142 1 138 79 Current income tax recovery (expense) (2,178) (1,125) (186) (577) (298) (443) (2,983) (1,878) Free Cash Flow 1 $ 1,860 $ 991 $ 777 $ 3,010 $ 3,051 $ 2,540 $16,370 $ 7,770 1. Non-IFRS Measure. See "Non-IFRS Measures" on page 6 of this report. Critical Judgements and Estimates The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reported period. The critical estimates and judgements applied in preparing Acadian's consolidated financial statements affect the determination of the timing of satisfaction of performance obligations related to revenue recognition, assessment of net recoverable amounts, net realizable values and fair values, including the fair value of assets acquired as part of a business combination, depreciation rates and useful lives, determination of functional currency and the selection of accounting policies. The critical judgements and estimates made in the preparation of Acadian's consolidated financial statements include, among other things, determining Acadian's customer and the timing of transfer of control in carbon credit sales arrangements, future prices and margins, future sales volumes, future harvest rates and sustainable yields, and discount rates utilized in the valuation of Acadian's timber, roads and land. In making estimates and judgements, management relies on external information and observable conditions where possible, supplemented by internal analysis as required. These estimates and judgements have been applied in a manner consistent with prior periods and there are no known trends, commitments, events or uncertainties that we believe will materially affect the methodology or assumptions utilized in making these estimates and judgements in these consolidated financial statements. For further reference on critical accounting policies, see our material accounting policies contained in Note 2 of Acadian's audited 2025 consolidated financial statements. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Related Party Transactions The Company provided professional services to Macer in the amount of $0.6 million (2024 - $nil). Shares were issued to Macer in accordance with the DRIP, as described within the section "Dividend Policy of the Company" of this MD&A. Contractual Obligations The Company has two significant contractual obligations, being the Fibre Supply Agreement and the Crown Lands Services Agreement. The Fibre Supply Agreement between the Company and Groupe Lebel expires in 2031. The provision of timber services under the Crown Lands Services Agreement at the direction of Twin Rivers Paper Company has a term equal to the term of the Crown License, including any renewal terms. See additional disclosure under the heading "Risks Related to the Business and Industry - Significant Contracts". The table below summarizes the Company's long term debt obligations as at December 31, 2025: Payments Due by Period Less Than One 1 to 3 Years 4 to 5 Years After 5 Years (CAD thousands) Total Year (2026-2028) (2029-2030) (>2030) Term facilities Tranche due March 6, 2027 1 $ 43,859 $ - $ 43,859 $ - $ - Tranche due March 6, 2030 1 21,930 - - 21,930 - Tranche due March 6, 2030 1 43,859 - - 43,859 - 109,648 - 43,859 65,789 - Equipment loan 1,534 698 836 - - $ 111,182 $ 698 $ 46,618 $ 68,674 $ - Interest payments $ 13,799 $ 4,225 $ 6,128 $ 3,446 $ - 1. Represents principal of the U.S. dollar denominated term facilities with a U.S. to Canadian dollar conversion rate of 1.3706, excluding unamortized deferred financing costs. RISK FACTORS The following information is a summary of certain risk factors and the potential impact these factors could have on the business, assets, financial condition, results of operations, cash flows, and liquidity of Acadian, as well as on the ability of Acadian to pay dividends on its common shares. Additional risks and uncertainties not presently known to Acadian, or that Acadian currently deems immaterial, may also impair the operations of Acadian. Risks Related to the Business and Industry Trade Restrictions A portion of Acadian's products produced in Canada and a portion of the products manufactured by Acadian's customers in Canada are exported to the U.S. for sale. The imposition of tariffs and duties by the U.S. government may, therefore, directly and/or indirectly impact the price of and demand for Acadian's products. It is unclear if and when changes in tariffs or duties will occur. Strength in lumber markets, combined with supply side factors may support a pass through of tariffs and/or duties to markets. Should additional costs not be passed through to markets, the price of Acadian's products derived from Canada may be adversely impacted. Conversely, the price of and demand for Acadian's products derived from the U.S. may be favourably impacted. Tariffs on U.S. Imports The U.S. government has imposed tariffs of varying amounts on various U.S. imports from Canada. There are currently no tariffs directly applicable to Acadian's products. A 10% tariff on softwood lumber and a 25% tariff on certain other wood products became effective in October 2025, which impacts some of Acadian's customers. Softwood Lumber Agreement Since 2006, Canadian softwood lumber exports to the U.S. have been subjected to export duties that were imposed under the Softwood Lumber Agreement between Canada and the U.S. (the "SLA"). On October 12, 2015, the 2006 SLA expired. At the end of 2017, the U.S. Department of Commerce began applying countervailing duties and anti-dumping rates for most Canadian producers. Since this time, the U.S. International Trade Commission has voted to maintain the anti-dumping and countervailing duty orders on softwood lumber from Canada. In response, Canada launched initiatives under NAFTA and with the WTO to review the U.S. duties on softwood lumber imports, which are ongoing. In September 2025, increased softwood lumber duties became effective at a combined rate of 35%. Significant Contracts The Company has two significant contracts, being the Fibre Supply Agreement ("FSA") and the Crown Lands Services Agreement ("CLSA"). The FSA between the Company and Groupe Lebel, an Eastern Canadian lumber manufacturer and North American forest products producer, expires in 2031. Pursuant to the FSA, Groupe Lebel has the right to purchase the majority of the spruce and fir softwood produced each year from the New Brunswick Timberlands. The terms of this agreement permit Groupe Lebel to permanently reduce its purchases by any amount, subject to certain notice periods. Groupe Lebel also has the right to temporarily reduce the volume of fibre that it purchases as a result of market factors, while retaining the right to increase such volumes in the future up to the committed level. These rights may restrict Acadian's ability to find replacement customers given the uncertainty of ongoing supply to which such replacement customers would be subject. Approximately 7% of Acadian's total sales for the year ended December 31, 2025 (2024 - 2%) were derived from sales made under the FSA. In addition, a portion of Acadian's revenue is generated from services provided under the CLSA with Twin Rivers Paper Company ("Twin Rivers"). The CLSA has a term equal to the term of the Crown license, including any renewal terms. The Crown license has been assigned to Twin Rivers as the owner/operator of its mills. If under any scenario, the mills were to close, the license would likely revert to the Crown resulting in the termination of the CLSA. Such events could eliminate the revenue earned by Acadian in providing services relating to the CLSA, and thus would result in a reduction of Free Cash Flow and could result in the impairment of intangible assets. Approximately 9% of Acadian's total sales for the year ended December 31, 2025 (2024 - 7%) were derived from services provided under the CLSA. Dependence on and Scarcity of Trained Labour Acadian relies significantly on a limited number of entities to cut and haul harvested timber, as well as to conduct road building and silviculture activities. If any of these entities were to stop doing business with Acadian, Acadian's operations could be negatively impacted. In addition, there is a limited supply of trained foresters and trained operators/contractors in the New Brunswick and Maine regions. Any decreases in this workforce could impact Acadian's ability to harvest and deliver products to its customers and may result in increased costs to Acadian to retain its workforce. The ability of trained contractors to operate across the U.S./Canada border may also depend upon regional and/or political constraints, which would further limit Acadian's ability to obtain skilled labour if such constraints were to materialize. Dependence on the Lumber and Pulp and Paper Industries Acadian's financial performance depends on the state of the lumber and pulp and paper industries, which can be cyclical. Demand for products from the lumber and pulp and paper industries is correlated with global economic conditions. In periods of economic weakness, reduced spending by consumers and businesses results in decreased demand for such products, resulting in lower product prices and possibly manufacturing downtime. The demand for logs and wood products is particularly affected by the level of new residential construction activity, repair and remodeling activity and, to a lesser extent, other industrial uses. Decreases in the level of residential construction activity generally reduce demand for logs and wood products, resulting in lower revenues, profits, and cash flows for lumber mills who are important customers to Acadian. This, in turn, may result in lower net sales, profits and cash flows for Acadian. In addition to impacting Acadian's sales, profits and cash flows, weakness in the market prices of its timber products may also have an effect on Acadian's ability to attract additional capital, its cost of that capital, and the value of its timberland assets. Lack of Control Over Government Set Land Management Service Fees, Fair Market Values and Allowable Annual Cut Acadian's revenue from operations in respect of the New Brunswick Crown Lands is generated from the harvesting service fees negotiated with wood users and land management service ("LMS") fees set by the Government of the Province of New Brunswick. Acadian has little control over the revenues from LMS fees as the Province dictates the LMS fees that Acadian receives. There is a risk that Acadian's overhead expenses incurred to provide services relating to the New Brunswick Crown Lands may not be fully recovered through the LMS fees set by the Province. The Province periodically establishes the fair market values to be paid for the right to harvest timber on Crown Lands. Fair market values are established for each product and species harvested. Charges levied on timber harvested from Crown Lands are based on the amount of timber cut and the fair market value then in effect. A reduction in the fair market value charged on Crown Lands could make Acadian's timber harvested from the New Brunswick Timberlands less competitive. The Allowable Annual Cut ("AAC") on Crown Lands for New Brunswick is determined by the Minister of Natural Resources and Energy Development of New Brunswick and reflects timber conditions, regional and local economic and social interests, and environmental considerations. A significant increase in the AAC on Crown Lands in any given year could have a negative impact on Acadian's ability to market its timber harvested from the New Brunswick Timberlands, particularly its spruce and fir sawlogs, which could have an adverse effect on Acadian's operating results. Fuel and Energy Costs Acadian relies almost exclusively on land transportation for delivering its timber and is therefore exposed to fluctuations in fuel cost. An increase in fuel cost may result in lower earnings and cash flows. In addition, many of Acadian's customers are high-energy consumers and, as a result, are themselves vulnerable to energy cost increases. If energy costs increase significantly, Acadian's customers may not be able to compete effectively and may have to reduce current operating volumes or close mills. Limitations on Ability to Harvest Weather conditions, timber growth cycles, property access limitations, availability of contract loggers and haulers, and regulatory requirements associated with the protection of wildlife and water resources may restrict Acadian's harvesting, as may other factors, including damage by fire, insect infestation, disease, prolonged drought, windstorms, flooding and other weather conditions, and natural and man-made disasters. Changes in global climate conditions could intensify one or more of these factors. Although damage from such causes usually is localized and affects only a limited percentage of standing timber, there can be no assurance that any damage affecting Acadian's timberlands will in fact be so limited. There can be no assurance that Acadian will achieve harvest levels in the future necessary to maintain or increase revenues, earnings and cash flows. Insect Infestations - Spruce Budworm Eastern Spruce budworm (Choristoneura fumiferana) is an insect that exists at endemic levels in the forest. However, every 30-40 years, the insect's population has the potential to reach epidemic levels and cause extensive defoliation of balsam fir and spruce that may lead to tree mortality after several years of occurrence. While management has taken steps to monitor regional trends in spruce budworm activity and is prepared to adjust harvesting to mitigate potential losses of commercial timber, there can be no assurances that future harvest levels of the affected species will be achievable. While spruce budworm outbreaks are widespread in Quebec, the Early Intervention Strategy started in New Brunswick in 2014 has resulted in no material impact to Acadian lands to date. During 2024, an increase in spruce budworm activity was noted in Maine, although not on Acadian's Maine Timberlands. The Maine Forest Service is developing an early intervention program expected to be similar to that in New Brunswick to manage the spruce budworm population. There has been no material impact to Acadian's Maine Timberlands to date. Restrictions Imposed by Forestry and Environmental Regulations While a significant portion of Acadian's timberlands are comprised of freehold timberlands and as such are subject to less regulation than the New Brunswick Crown Lands, provincial, state, and federal government regulations relating to forestry practices and sale of logs may result in increased costs for Acadian and accordingly, impact its financial results and operations. In addition, forestry and environmental regulations may restrict timber harvesting and may otherwise restrict the ability of Acadian to conduct its business. Although Acadian believes that it is in material compliance with these requirements, there can be no assurance that it will not incur significant costs, civil and criminal penalties and liabilities, including those relating to claims for damages to property or natural resources, resulting from its operations. Laws, regulations and related judicial decisions and administrative interpretations affecting Acadian's business are subject to change and new laws and regulations that may affect its business are frequently enacted. Some of these laws and regulations could impose significant costs, penalties, and liabilities on Acadian for violations or existing conditions whether or not Acadian caused or knew about them. Acadian is subject to laws and regulations which relate to, among other things: the protection of timberlands, the protection of endangered species, air and water quality, and timber harvesting practices. Regions with frequent policy changes add volatility to revenue streams and depress timberland values. Historically, New Brunswick has had relatively stable forestry regulations. Forest regulations in Maine have experienced volatility in the past but have not significantly impacted forest operations to date. In connection with a variety of Acadian's operations, the Company may be required to make regulatory filings. Any of the government agencies could delay the review of or reject any of Acadian's filings which could result in a delay or restriction in harvesting, replanting, thinning, insect control or fire control. Disease Outbreak An outbreak or escalation of a contagious disease may adversely affect Acadian's business. A local, regional, national, or international outbreak or escalation of a contagious disease, including the COVID-19 coronavirus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu, or any other similar illness, or fear of the foregoing, could interrupt the businesses of Acadian's customers, cause labour shortages, interrupt services from third parties upon which Acadian relies, increase operating costs, result in governmental regulation adversely impacting its business, and otherwise have an adverse effect on its business, financial condition and results of operations. Highly Competitive Industry Timberland companies operate in a highly competitive business environment in which companies compete, to a large degree, on the basis of price and also on the basis of service and ability to provide a steady supply of products over the long-term. In Acadian's markets, there are many suppliers of softwood and hardwood logs. In addition, Acadian may also be subject to increased competition from worldwide suppliers importing forest products, and/or subject to increased competition from a variety of substitute products. Acadian's competitive position is also influenced by a number of other factors including: the availability, quality, and cost of labour; the cost of energy; the ability to attract and maintain long-term customer relationships; the quality of products and customer service; and foreign currency fluctuations. Currency Risk All of the sales from Maine Timberlands, including all sales of voluntary carbon credits to date, and a portion of the sales from New Brunswick Timberlands, representing a significant portion of gross revenues earned, are in U.S. dollars. In addition, all expenses incurred in respect of Maine Timberlands and a nominal amount of the expenses of New Brunswick Timberlands are in U.S. dollars and all of Acadian's debt financing and all interest payable thereon is in U.S. dollars. As a result, Acadian's cost competitiveness could be impacted by unfavourable fluctuations in currency exchange rates. In addition, the apparent historical correlation between currency rates and timber prices in regions within close proximity to the U.S./Canada border may weaken over time thereby undermining any hedge relating to Maine Timberlands. Acadian's customers are also susceptible to currency value fluctuations which may negatively impact the sawmills and pulp and paper mills to which Acadian sells its fibre, and accordingly the quantity of fibre sales to such customers could decline. Forest Management Although management believes it follows best practices with regard to forest sustainability and general forest management, there can be no assurance that the established harvest levels of New Brunswick Timberlands and Maine Timberlands and management's forest management planning, including silviculture, will have the intended result of ensuring that Acadian's asset base remains stable or appreciates over time. If management's estimates of merchantable inventory are incorrect or the annual harvest is too high, harvesting levels of Acadian's timberlands may result in depletion of Acadian's timber assets. Geographic Concentration Acadian's timberlands are located exclusively in Maine and New Brunswick. Accordingly, if the level of production from forests in this region substantially declines or demand in the region were to decline for any reason, including closure of pulp, paper or lumber manufacturing operations in the region, such changes could have a material adverse effect on Acadian's overall harvest levels and its financial results. Insurance Acadian's business is subject to risks from fire, insect infestation, disease, drought, severe weather, unforeseen equipment breakdowns, and other events, including events of force majeure, which could result in material damages to Acadian. As is common in the forest products industry, Acadian does not maintain insurance coverage for damage to its timberlands, but Acadian is insured against most other conventional business risks. Seasonality Acadian's operations are subject to seasonal variations and, as a result, Acadian's operating results vary from quarter to quarter. Harvesting activity can be compromised by inaccessibility to some sites during wet seasons resulting in decreased harvest levels. Results of one quarter will not be indicative of results that may be achieved in other quarters or for the full year. Non-Timber Income New Brunswick Timberlands and Maine Timberlands have several sources of non-timber income including sales of carbon credits, various land leases for recreational and commercial use, and a recreational access permit program. Most of these revenues are not subject to long-term agreements and as a result, any decrease in the activities that lead to those revenues could impact Acadian. Protection of Threatened or Endangered Species and Waterways Federal, state, and provincial laws and regulations protecting threatened or endangered species, waterways and wetlands or other environmental values may limit or prevent timber harvesting, road building and other activities of Acadian. The size of the area subject to restriction will vary depending on the protected species at issue, the time of year, and other factors, but can range from less than one to several thousand acres. As Acadian gains additional information regarding the presence of threatened or endangered species on its timberlands, or if regulations become more restrictive, the amount of its timberlands subject to harvest restrictions could increase. Climate-Related Legislation or Regulation There are several international, federal, provincial and state-level proposals addressing domestic and global climate issues. Generally, such proposals could impose regulation or taxation on the production of carbon dioxide and other "greenhouse gases" in an attempt to reduce emissions to the atmosphere and provide tax and other incentives to produce and use more "clean energy". Any future legislative and regulatory activity in this area could affect Acadian and its operations. Physical Risks Related to Climate Change Acadian's timberlands may be adversely affected by changes in global climate conditions, including increases in average temperatures, that may increase risks of severe weather events, such as prolonged drought or flooding. Climate change could exacerbate current risks including damage by fire, insect infestation and disease which could in turn impact the health, growth rate, and species mix of Acadian's timber. Cybersecurity Acadian relies on information technology to carry out its operational activities, maintain its business records, collect and store sensitive data, including intellectual property, other proprietary and personally identifiable information. A security failure of that technology could impact Acadian's ability to operate its businesses effectively, adversely affect its reported financial results, impact its reputation, and expose it to potential liability or litigation. Some systems are internally managed, and some are maintained by third-party service providers. Acadian and its service providers employ what are believed to be reasonably adequate security measures, but notwithstanding these efforts, systems could be compromised as a result of a cyber incident, natural disaster, hardware or software corruption, failure or error, telecommunications system failure, service provider error or failure, intentional or unintentional actions by personnel or other disruption. If by any cause systems or information resources were compromised, or if data were destroyed, misappropriated or inappropriately disclosed Acadian could suffer significant loss or incur significant liability, including: damage to reputation; loss of customer confidence or goodwill; and significant expenditures of time and money to address and remediate resulting damages to affected individuals or business partners, or to defend Acadian in resulting litigation or other legal proceedings, by affected individuals, business partners or regulators. Loss of Key Management and Inability to Attract and Retain Key Staff Acadian's success depends, to a significant extent, upon its ability to attract, retain, and develop senior management, operations management, and other key personnel. Its financial condition or results of operations could be significantly adversely affected if Acadian were to fail to recruit, retain, and develop such personnel, or if there were to occur any significant increase in the cost of providing such personnel with competitive total compensation and benefits. Land Claims Land claims could adversely affect Acadian's ability to harvest timber. Canadian courts have recognized that Aboriginal people may possess rights at law in respect of land used or occupied by their ancestors where treaties have not been concluded to deal with these rights. In Canada, Aboriginal groups have made claims in respect of land governed by Canadian authorities as well as land owned by private land owners, which could affect a portion of the land covered by Twin Rivers' Crown licenses as well as the land owned by Acadian. Any settlements in respect of these claims could lower the volume of timber managed by Acadian and could increase the cost to harvest timber on such lands. On November 30, 2021, the Wolastoqey Nation (made up of six Maliseet First Nations) filed an Action in the Court of King's Bench of New Brunswick naming the Province of New Brunswick and the Attorney General of Canada and several other forestry and other companies operating in New Brunswick as defendants. Acadian's subsidiaries Acadian Timber Limited Partnership by its General Partner, Acadian Timber GP Inc., and Acadian Timber GP Inc. are among the defendants in this Action. The Action seeks, in part, a declaration of Aboriginal Title to the land currently owned by the defendants in New Brunswick, including Acadian. On November 14, 2024, a Motion to Dismiss was granted by the Court removing Acadian, but not removing their lands, from the claim. Acadian appealed certain aspects of the dismissal, namely that its lands be removed from the outstanding claim against the Crown. On December 11, 2025, Acadian's appeal was successful. Wolastoqey Nation has indicated it intends to seek leave to appeal the decision to the Supreme Court of Canada. It could be many years before any court decision is rendered if the Action proceeds further. The outcome of the claim is not determinable at this early stage. No assurances can be given that the claim would not have a material effect on Acadian's financial position, results or operations. Should such claim be resolved by government or the courts in favour of the Wolastoqey Nation, it could materially adversely affect the business of Acadian. Litigation Acadian is subject to litigation risks. Defence and settlement costs of legal claims can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, the resolution of any particular legal proceeding to which Acadian is or may become subject could have a material effect on its financial position, results of operations or Acadian's operations. Undetected Environmental Liabilities Acadian may currently own or may acquire properties subject to environmental and other liabilities, such as obligations to clean up or pay for the cleanup of contamination. While timberlands do not generally carry as high of a risk of environmental contamination as industrial properties, the cost of cleanup of contaminated properties could increase Acadian's operating costs. Ability to Identify and Complete Investment Opportunities Acadian's growth strategy is to acquire high-quality timberland investments with the objective of achieving appropriate risk-adjusted returns on its invested capital over the long-term. However, there is no certainty that Acadian will be able to find and complete sufficient investment opportunities that meet its investment criteria. Acadian's investment criteria considers, among other things, the financial, operating, governance and strategic merits of a proposed acquisition. Competition for assets is significant and competition from other well-capitalized investors or companies may significantly increase the purchase price or prevent Acadian from completing an acquisition. Risks Related to the Structure of the Company Payment of Dividends As a corporation, the Company's dividend policy will be at the discretion of the Company's Board of Directors. Future dividends, if any, will depend on the operations and assets of the Company and its subsidiaries, and will be subject to various factors, including, without limitation, the Company's financial performance, fluctuations in its working capital, the sustainability of its margins, its capital expenditure requirements, obligations under its credit facilities, provisions of applicable law and other factors that the Board of Directors may deem relevant from time to time. Accordingly, the payment of dividends by the Company and the level thereof will be uncertain. Market Price of Common Shares The market price of the Common Shares may be subject to wide fluctuations in response to many factors, including variations in the operating results of Acadian, divergence in financial results from expectations, changes in the business prospects for Acadian, general economic conditions, legislative changes, and other events and factors outside of the Company's control. In addition, stock markets have from time-to-time experienced extreme price and volume fluctuations, which, as well as general economic and political conditions, could adversely affect the market price for the Common Shares. The Company is unable to predict whether substantial amounts of Common Shares will be sold in the open market. Any sales of substantial amounts of Common Shares in the public market, or the perception that such sales might occur, could materially and adversely affect the market price of the Common Shares and the ability of the Company to raise capital. Dilution of Existing Shareholders The Company is permitted to issue an unlimited number of Common Shares pursuant to its Articles and may do so, subject to compliance with the rules and regulations of the TSX and other applicable securities regulations, for that consideration and on those terms and conditions as shall be established by the Company's Board of Directors without the approval of any Shareholders. The Shareholders will have no pre-emptive rights in connection with such further issuances. Leverage and Restrictive Covenants in Agreements Relating to Indebtedness The ability of the Company and its subsidiaries to pay dividends or make other payments or advances is subject to applicable laws and contractual restrictions contained in the instruments governing any indebtedness of those entities (including the credit facilities). The degree to which the Company is leveraged could have important consequences to the Shareholders including: the Company's ability to obtain additional financing for working capital, capital expenditures or acquisitions; a significant portion of the Company's cash flow from operations may be dedicated to the payment of the principal and interest on its indebtedness, thereby reducing funds available for future operations; certain borrowings may be at variable rates of interest, which exposes the Company to the risk of increased interest rates; and the Company may be more vulnerable to economic downturns and be limited in its ability to withstand competitive pressures. The terms of the credit facilities include numerous restrictive covenants that limit the discretion of the Company's management with respect to certain business matters. These covenants place significant restrictions on, among other things, the ability of the Company and its subsidiaries to create liens or other encumbrances, or make certain other payments, investments, loans and guarantees and to sell or otherwise dispose of assets and merge or consolidate with another entity. In addition, the terms of the credit facilities include financial covenants that require the Company to meet certain financial ratio tests. A failure by the Company to comply with the obligations relating to the credit facilities could result in a default which, if not cured or waived, could result in a termination of dividends by the Company and require accelerated repayment of the relevant indebtedness. If the repayment of indebtedness under the credit facilities were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay in full that indebtedness. There can be no assurance that the credit facilities will be able to be refinanced or refinanced on acceptable terms or that future borrowings or equity financings will be available to the Company, or available on acceptable terms, in an amount sufficient to fund the Company's needs. This could, in turn, have a material adverse effect on the business, financial condition and results of operations of the Company and could therefore affect the ability of the Company to pay dividends on its Common Shares. Cautionary Statement Regarding Forward-Looking Information and Statements This MD&A contains forward-looking information and statements within the meaning of applicable Canadian securities laws that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Acadian Timber Corp. and its subsidiaries (collectively, "Acadian"), or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking information is included in this MD&A and includes statements made in the sections entitled "Segmented Results of Operations - Maine Timberlands", "Segmented Results of Operations - Environmental Solutions", "Outlook", "Trade Restrictions", and "Land Claims" and without limitation other statements regarding management's beliefs, intentions, results, performance, goals, achievements, future events, plans and objectives, business strategy, growth strategy and prospects, access to capital, liquidity and trading volumes, dividends, taxes, capital expenditures, projected costs, market trends and similar statements concerning anticipated future events, results, achievements, circumstances, performance or expectations that are not historical facts. All forward-looking statements in this MD&A are qualified by these cautionary statements. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, should not be unduly relied upon, and will not necessarily be accurate indications of whether or not such results will be achieved. Actual results may vary. These forward-looking statements include, but are not limited to: Expectations regarding the number and timing of carbon credits that will be successfully registered and available for sale. Actual credit issuances will be adjusted each reporting period based on actual harvesting, natural disturbances and other factors, as well as periodic updating for inventory and verification activities. Expectations regarding product demand, pricing and end use markets, including expectations for U.S. housing starts, which may be impacted by changes in interest rates, U.S. population demographics and the inventory of homes for sale. Expectations regarding product demand and pricing are based on anticipated market conditions, anticipated regional inventory levels of key customers, and the economic situation of key customers. Estimates for U.S. housing starts are based on forecasts published by major financial institutions. Expectations regarding future production volumes and costs associated with internal logging operations which may be impacted by operational efficiency, the regional supply of skilled operators, product demand, pricing and end use markets. Expectations regarding the impacts of escalated duties on softwood lumber and tariffs or potential tariffs levied on U.S. imports from Canada, which may include direct impacts related to changes to the price of and demand for Acadian's produ...

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