Reid Carter - President and CEO Brian Banfill - CFO

Paul Quinn - RBC Capital Markets Andrew Kuske - Credit Suisse

Thank you Brock actually we're going to start with Brian Banfill our CFO. So Brian, go ahead.

Thanks Reid and thank you operator. And good afternoon everyone and welcome to Acadian's fourth quarter conference call.

Before we get started, I would like remind everyone of the following. This conference is being webcast simultaneously through our website at www.acadiantimber.com where you can also find a copy of the press release including the financial statement.

Please note that in responding to questions and talking about our fourth quarter financial and operating performance as well as our outlook for 2015 we may make forward-looking statements. These statements are subject to known and unknown risks and future results may differ materially.

For further information on known risk factors, I encourage you to review Acadian's annual information form dated March 28, 2014 and other filings of Acadian with securities and regulatory authorities which are available on CEDAR at www.cedar.com and on our website. I'll start by outlining the financial highlights for the fourth quarter, then Reid Carter, Acadian CEO will provide comments about our operations, market conditions, business development activities and our outlook for 2015.

Acadian’s operations performed very well again this quarter delivering the highest fourth quarter adjusted EBITDA since the inception of the company. Weather conditions were typical for the quarter with no severe storms or temperature variations impeding the operations and solid customer demand for our key products drove meaningful year-over-year price increases.

Net sales for the fourth quarter totaled $22.5 million, a $0.7 million or 3% increase compared to the same period in 2013. The year-over-year increase in net sales reflects a 10% increase in the weighted average log selling price, partially offset by a 3% decrease in sales volume.

The selling price improvement was spread across of the log products produced by Acadian’s with softwood saw timber and hardwood pulpwood seeing the biggest gains at 12% and 10% respectively. This positive top line performance with minimal per unit cost increases drove adjusted EBITDA up to $7.5 million a $1.3 million improvement over the prior year.

It also boosted the adjusted EBITA margin which climbed to 33% from 28% in the same period last year. Free cash flow was up $1 million from the fourth quarter of 2013 to $6.3 million resulting in a payout ratio of just 55% compared to 65% for the same period last year and for the year as a whole the payout ratio dropped to 78%.

We are pleased to announce that in recognition of this strong performance, along with an expectation of continued strong performance over the next several years; Acadian's board of directors has reached the decision to increase Acadian's target annual dividend approximately 9% to $0.90 per share. This new target dividend will be effective in the first quarter of 2015.

As I'm sure all participants on this call noticed, Acadian's net income is slight upward significantly in the quarter. The increase is primarily attributable to the pre-tax $53.1 million adjustment of the fair value of Acadian's timberlands compared to an adjustment of just $1.6 million in the prior year.

This fair value adjustment also contributed $13.6 million to the differed tax expense in the quarter an increase Acadian's book value per share to $14.86. As we've suggested on previous calls the Timberlands acquisition environment in North America was highly competitive throughout 2014 evidence from Timberlands transactions that we're completed during the year that Acadian's independent third party appraiser uses to use significantly lower discount rate in the discounted cash flow models used as the primary basis to value Acadian's Timberland than had been used in prior year.

This change in the discount rate was the primary driver of the valuation increase while changes material were comfortable that the resulting values fairly represents the value of the Acadian's Timberland. I will now briefly review the segmented results for Acadian’s New Brunswick and Maine operations.

Net sales from our New Brunswick operations for the fourth quarter totaled $15.6 million compared to $16.7 million for the same period last year. A 7% increase in the average log selling price was more than offset by the 10% decrease in the sales volume.

The volume decrease reflects the fact that sales volumes in the fourth quarter 2013 were exceptionally strong due to the catch-up from below normal harvest levels in the first three quarters of that year. The 2014 volumes are more typical of long-term expectations for the quarter.

The weighted average selling price across all log products was $64.57 per cubic meter in the fourth quarter of 2014 up $4.44 per cubic meter from the same period last year. This year-over-year increase in the average log selling price reflects improved selling prices for all products with an 8% gain in hardwood pulpwood leading the way.

Cost for the fourth quarter of 2014 were $10.2 million compared to $11.7 million in the comparable quarter of 2013. The decrease in total cost was due to lower harvest volumes.

Variable cost per cubic meter increased just 1% than the prior year. Fourth quarter adjusted-EBITDA for the New Brunswick operation was $5.4 million, up $0.4 million compared to the fourth quarter of 2013 again reflecting improved prices offset by lower sales volumes.

Adjusted-EBITDA margin increased to 35% from 30% in the prior year. At the Maine operation, sales volumes were up 20% year-over-year and Canadian dollar based log selling prices jumped 15%, as a result net sales for the fourth quarter of 2014 were up significantly year-over-year climbing $1.9 million to $6.9 million.

The weighted average log selling price in Canadian dollar terms was $70.32 per cubic meter in the fourth quarter up $9.06 per cubic meter from $61.26 in the same period of 2013. Weighted average log selling prices in U.S.

dollar terms increased 6% year-over-year. Cost for the fourth quarter were $4.6 million compared to $3.5 million during the same period of 2013.

Higher sales volumes in the foreign exchange impact of the strengthening U.S. dollar on the Maine Timberland’s U.S.

dollar denominated cost drove the increase. Variable cost per cubic meter in U.S.

dollar terms climbed just 1%. Adjusted-EBITDA for the Maine operation was up 51% to $2.4 million, improved log prices increased the adjusted-EBITDA margin to 34% from 31% prior year.

Switching over from the operations to our cash position. At the end of the fourth quarter, Acadian had cash on hand totaling approximately $12.7 million which is $4.1 million higher than the cash balance at the same time last year.

The primary driver of the increased cash balance was the generation $3.8 million of free cash and excess dividend payments over the last 12 months. The current cash balance is $0.2 million lower than the balance at the end of the third quarter in 2014 reflecting the free cash flow generation in the quarter and an increase in working capital as accounts payable balance in New Brunswick, which returned to more typical level.

As of December 31, 2014 Acadian had net liquidity of $79.9 million, including funds available under Acadian’s revolving facility and our standby equity commitment with Brookfield. Balance sheet remained strong to keep Acadian well positioned for the future.

During the quarter, we distributed $0.21 per share to our shareholders a dividend that was in line with previous quarters and more than supported by our steady performance. I will now turn the call back over to Reid.

Acadian’s operations experienced three recordable instances involving employees and no recordable instance among us contractors during the fourth quarter, resulting injuries were minor but one did result in last time. We continue to work with our contractors and employees to ensure the highest standards of workplace safety are maintained, and are very pleased to report the employees of our Maine operations have now completed 14 years without reportable incident, what we believe to be a very impressive result.

Acadian’s weighted average log selling price in the fourth quarter increased 10% year-over-year, realizing Canadian dollar prices improved for all log products with gains of 4% for softwood pulpwood, 7% were hardwood soft timber, 10% for hardwood pulpwood and 12% for softwood sawlogs. While the portion the credit goes to the stronger U.S.

dollar, base currency gains are realized for all log products except for softwood pulpwood in Maine. Softwood pulpwood remains our most challenging product as the number of pulp customers operating in our recent continues to decline.

And as we have noted many times in the past, this product made up only 6% of total sales with 4.5% of gross margin in 2014. Biomass gross margin was down 27% year-over-year with the majority of the change coming from the new Brunswick operations where smaller proportion other volume was sold to the higher margin expert market in the prior year.

Again I would point out the biomass is a very little margin product for Acadian. Acadian’s financial for 2015 remained positive.

We believe there are several reasons to be optimistic about the housing sector in 2015. U.S.

job creation has been very strong with employers adding an average of 246,000 jobs per month in 2014 which marked the strongest employment growth 15 years. The rate of housing price increases moderated mortgage rates back below 12% with the complimentary using credit standards.

All of these factors should support increasing rates of household formation in 2015 with household formation having the missing ingredient over the last five or six years, these demand-side factors combined with the declining overhang of foreclosure housing and stock and the fact that vacancy rates of houses for rent and for sale are now back to normal levels, leaves the U.S. housing market well positioned for recovery.

This expectation of a continuously improving U.S. housing market and continued strong exports should keep North American lumber prices well above historical norms encouraging Acadian’s key solid wood customers to continue to operate at full capacity.

As such, we expect to see ongoing strong demand for softwood sawlogs in the Acadian’s operating region. In addition to our positive outlook for softwood sawlogs, markets for hardwood sawlogs have been positive and continue to remain very stable.

Demand and pricing for hardwood pulpwood continues to be very strong in fact I’d say exceptionally strong. Acadian has been successful in selling all of its softwood pulpwood production, but as I mentioned, this market continues to be challenged by the closure of the great northern paper facility Millinocket at Maine and Verso’s Bucksport Maine facility.

We’re hopeful to plan efforts to convert the portion of pulp production to softwood at the Old Town and Woodland mills in Maine might provide some relief from current market softness for this product. Biomass sales have begun to improve as reduction of logistical challenges previously constraining exports from our New Brunswick operations has been relieved.

Brian has discussed the impact of our year-over-year increases in Acadian’s appraised value on our book value, net income and income tax expense. In addition to his comments, I believe it’s worth nothing that as this common practice and with the full support of the Acadian’s Board, we decided to change professional appraisal firms in 2014 to bring a fresh approach to appraisal process.

We held a formal RFP process resulting in a selection of firm with many years of operating and appraisal like experience in the Acadian areas. Acadian’s Board and auditors have exercised appropriate levels of professional skepticism in reviewing this new appraisal and have concluded thoroughly and confidently reflux and appropriate value in today’s highly competitive timberlands marketplace.

As you now Brookfield as [Manager] Acadian is very actively involved in North American and global timberlands market, we would note that the increase in Acadian’s appraised value is also consistent with our experience in timberlands marketplace over the few years. On the business development front, we continue to actively pursue opportunities in support of the Acadian’s growth strategies in U.S.

Australasia and South America. We’re witnessing increased transaction activity in all these markets and continue to work on several opportunities in United States, Brazil, Chile, Uruguay and New Zealand during the fourth quarter.

Our goal is to build the balanced portfolio between current cash flow and capital appreciation with the ultimate focus being on our long-term total return target of 10% to 12%. Acadian shareholders can be confident, they will stay focused and disciplined and as I am sure you can understand patient in our search already throughout your investors and patient in our search for growth.

In closing, we’re very pleased with the Acadian’s exceptionally strong operating performance in 2014 and look forward to reporting continued strong performance in the coming quarters. We thank you for your continued support of Acadian.

That concludes our formal remarks and we’re available to take any questions from participants on the line. Operator?

Just a couple of questions, one in terms of Q4 where the really strong results partly attributed to pulling forwards some of the volume from Q1 and then just when I take a look back at your reporting since when you started in basically 2005 sort of the split in EBITDA among quarters used to be a lot of stronger in Q1 than the remaining quarters and now it seems to be more balanced between Q1 and Q3, Q4 with Q2 latest is there a material change in that as well?

Hi, Paul, it’s Brian. To your first question, no, I don’t think the Q4 results do represent any pulling forward in Q1 volume, it was a good operating period we had good contractor productivity in the Maine operations and it just allowed us to get a lot of volume groups and there should be nothing coming out of next quarter results.

In terms of the kind of smoothing out of the quarterly results, I think most of what you’re seeing over the past few years is in 2012 and 2013 we reported that we ran a vendor managed inventory program with the Twin Rivers Group and that did change the timing of cash flows between Q1 and Q2. In 2014, we ran a modified version of that which was actually helpful to us from a bottom line point of view and helped them to manage their inventory as well and they’ve asked us to run a similar program in 2015.

So you will see again a bit of that powder and we’re some of the Q1 EBITDA has been pushed over in Q2.

Okay, great thanks Brian. And then just you've done a great job sort of managing cost inflation and it seems to be only 1% year-over-year in both operations, do you have kind of quick thoughts on the drop in oil prices and I guess lesser drop in diesel and how that's going to affect you in '15 and maybe not see any cost inflation across your operations?

Hi Paul, it's Reid. I think we're quite optimistic about our ability to keep cost down through 2015, as a very leads, the decline in diesel prices and fuels are upward over 20% of our total longing and hauling cost so they're very significant.

They will certainly take pressure off contractors pressing for better overall payments and pricing. We have some of it is informal among where we negotiate term prices for next year with our contractors in some we actually have fuel surcharges built in where it will actually see a direct decline in prices from that.

But I think certainly you'll see reduced cost pressures all in to lower fuel cost here in this through 2015, we will benefit from it. I don't know that we'll see lower overall cost, FX alone well in U.S.

dollars and Canadian dollars and everything I just said will be true. FX alone will move around cost but certainly it also move around our Canadian dollar translation of our Maine operations, U.S.

dollar income.

Okay, thanks for that and you referenced sort of increased softwood pulp production at Old Town and Woodlands, maybe you could just sort of dive into that a bit, how much extra production do you expect is that going to short that softwood pulp market for you and is that material at the end of the day for you?

Paul, that's the good news is that we've been able to sell over softwood, pulpwood so far, we're just being has been positive and now admittedly it’s been at lower margin. My understanding is the Old Town Maine mill is restarting or how is it actually I think we started just in this last month or two and they have intention to use softwood pulpwood.

I don't have handy sort of what volume I expect to take in of softwood pulpwood. We have actually discussed with our - I can’t remember top of head.

Old Town Maine housing ability to swing between hardwood and softwood to some degree, they have done softwood trials over the last several years and the number that I heard from our operating people so it's not from Old Town is that they may be moving to something that [indiscernible] were ahead as perhaps 20%. So there are large by New England standards I think they run sort of lower 400,000 tons a year I think.

So, they could be using a substantial amount of softwood but all that to be verified pulpwood, we'll try to dig around it and send you a note.

Thank you, good afternoon. I guess the question just relates you're on the path of dividend growth which is positive and the shares that we rated and I just want to get some kind of context on how you think about the acquisition environment I know Reid gave some color around it in your comments but in particular, how do you think about acquisitions now with just some of the FX moves that we've seen globally, are you really tilting your bias towards Australasia and South America at this point and contrasting that with the U.S.

if you think the stock is and the company is a Canadian company and just what the FX moves that we're seeing?

So certainly, we have always had stating strategy of target payout ratio of approximately 95% and we've got a tremendous confidence in our business outlook over the coming time, over the future here in medium term. And we've got a very strong balance sheet.

So I don't think we have changed our strategy in terms of dividends or simply cut the cash to support that dividend to increase and confidence in the medium term to maintain it. In terms of our business development, we've always expected that for Acadian to make any kind of transformative acquisition would require going through the market, we've got our line of credit, it gives us this we'll call it $60 million or $70 million of room for smaller acquisition but we have always envisioned going to the market and sort of be able to present an enthusiastic view of what the acquisitions look like and issue insurance to do so.

In terms of where we see opportunities, we've always felt that Acadian's growth could include Australasia and Latin America but we've always felt that given that we're located today in New Brunswick and Maine and we've a significant retail holding I think that we can only move the sort of the investment thesis so far given onetime I mean I think to turn up I may have said this in last call to top of the large Brazilian transaction, tell Acadian’s shareholders whether now two thirds of equities in Brazil among one third in Northeast and U.S, Canada might be a little more aggressive than those investors might expect. So we're trying to find the balance of those outside North America jurisdictions and North American opportunities and finding scale where we can dramatically approve Acadian's liquidity.

So we have stated the past we have private equity funds targeting Canada, U.S, Brazil, Chile, Uruguay, New Zealand and Australia that’s our larger timber fund five we've a second Brazil fund and what we've offered Acadians ability to participate effectively a free option to participate in those acquisitions. So I think what we'd expect is the board will look at these opportunities that they come up and build a side when they've got the right portfolio of opportunities to be aligned with Acadian's on current yield and within an appropriate range of rate of change in terms of geographic jurisdiction that would gaining support of Acadian's shareholders.

So all of set we're looking in all jurisdictions and we're trying to find the right opportunities for Acadian in a very, very competitive global timberlands marketplace. It's not just the U.S that’s competitive it's extremely competitive in Latin America and New Zealand, Australia and frankly I suggest all global jurisdictions very hard to be a first mover, early adopter in timberlands globally.

Okay that’s very helpful and then I guess is on the transaction pipeline are you seeing just a better potential deal flow from funds that bought assets whether they'd be five or ten years ago on their coming up to effectively termination dates or extension periods; is that one bucket versus a cooperate sellers of outside. And then I guess the final two buckets are really are private sellers that on timber and then governments may have timber or effectively leases with their looking to happily dispose in the market price.

I would say we're seeing all of the above the financial sellers maturing funds lot of anticipation. What we're seeing more than anything with those sellers particularly I guess those would have separate accounts rather than coving of funds is we're seeing a large number of very small transactions.

So when you look at the average transaction size approximately 53 transactions in the U.S last year. The average transaction size was possibly $25 million and certainly when those made the acquisition I would haven’t done the map.

But I would expect that they were much, much larger on average. So we're seeing these small transactions, we’ve also seen a big change into who the buyers have been.

If you look at those transactions between 2001 and 2012 TIMO is accounted for just under about 78% of the total transactions by value. With all others been already in 22% if you look at it in 2013 and 2014 you saw that the U.S publically-traded timber REITs, the [indiscernible] Church and the [indiscernible] Indian tribe in Washington accounted for above 80% and TIMO is only about 20%.

So we've got a very broad group of potential buyers that publically-traded timber REITs being much more aggressive and in the middle a few large transactions are still long view in the [indiscernible] to creek where skew those numbers by value. But as I said the key thing has been a large number of very small transactions, which really isn’t our key focus area we've participated in those that we're interested in but the transaction cost were high in those and this just made a smaller competition in that price range.

I just wanted to also ask about cost Paul covered off the variable cost question. Maybe you could talk about the pleasant development in SG&A how that happened and whether it's likely to be sustainable.

Its Brain I can respond to that so I'll admit that some of last year’s cost was due to us getting a little bit over the aggressive loan accrual at year end. So some of that is just an adjustment of that backing out and we also had a couple of special projects going on in the year related to review acquisition opportunities that increase some of the overhead cost as well.

So I think the level that you're seeing in 2014 is reasonably reflective of where we'd expect to be probably within 10% of what we would see as the long term trend for admin cost subject to periods where we were actually involved in acquisition opportunity.

Thank you operator and thanks all of you for attending our fourth quarter conference call. As always we remain available if you have any further questions.

And we look forward to what we believe will be a very successful 2015. Thanks again.