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Company Updates
Ash Grove Cement
In September 2017, Ash Grove announced that it had agreed to sell itself to Irish building materials
company CRH Plc for a $3.5 billion enterprise value ($450/share plus dividends of excess cash). The
FTC finally approved the merger and the deal has closed. This one was written up on the Oddball blog
way back in 2011 when it was trading at $128. That was less than two-thirds of book at the time.

Ash Grove was also written up on Value Investors Club in October 2012 when it was trading at $145
per share. According to that piece, Ash Grove's origins dated back to 1882, meaning that before the
recent buyout it was in both the triple digit share price and century-old OTC/Oddball stock categories.

The VIC writeup attempted to value ASHG in a variety of different ways: LTM EBITDA multiple,
tangible book multiple, replacement cost, normalized EBITDA multiple, and enterprise value per ton of
capacity. The author thought that the most conservative method was capacity per ton and compared
with publicly traded (SEC-filing) comps like TXI, which was trading at $207 per ton, and also noted
that a recent acquisition had taken place at $240 per ton. Using the lower $207 figure against ASHG's
cement capacity he came up with a value estimate 70 percent higher than the trading price at the time.
The estimates based on the other methods were higher: up to $434 per share.

He argued that the stock was cheap because it was “illiquid” and family controlled, saying “The X
factor is your patience. Good things happen to cheap stocks.” Commenters were not exactly overjoyed
with the idea. However – as Nate points out in his founder's letter this issue – price ultimately ruled the
day on this one.

Bonal International, Inc.

The Nov 2015 Newsletter had a piece on Bonal, and as the company just put out its 2018 annual report
(fiscal year end is March 31st), we thought we would do a quick update. Three years ago the company
was trading in the low $2s (same as today), with a market capitalization of about $4 million. For fiscal
year 2016 (which ended March 31, 2016), the company earned $202k. This most recent fiscal year net
income was $285k. (However, the year in between the company earned only $54k.) Two Oddballians
planned to be at the August annual meeting, so we may do a more in-depth discussion next issue.

Boston Sand and Gravel Co.

This one has not been written about in the Newsletter or on Nate's blog, but it definitely qualifies as an
Oddball and we thought we should give a quick mention of their 2017 results. BSND was founded in
1914 and went public in March 1929. They describe their businesses as “extensive bulk materials
production, logistics and delivery of ready mix concrete, sand, and aggregate products.” Also, for
railroad enthusiasts, BSND owns a class III railroad, the New Hampshire Northcoast, which they
created in 1986 by buying and rebuilding an abandoned rail line. It has 3 locomotives, a caboose and 78
hopper cars, which take sand and aggregates down 43 miles of owned track.

Here is a sign of a true Oddball: there is a Supreme Court case, Boston Sand & Gravel Co. v. United
States, that was decided in November 1928 by Justice Oliver Wendell Holmes. Apparently, a “steam

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lighter” - a small ship - owned by the company collided with an U.S. destroyer. The case seems to have
never been cited, which perhaps has prevented BSND from becoming a nationally known name. But
Boston Sand is known in Boston. Their works are right by Interstate 93 before it crosses the Charles
River into the North End. This is where Ben Affleck works in The Town, breaking rocks. Bob Villa did
a special episode touring it on This Old House. (We have posted a link to watch it in the forum.)

Shares of BSND are trading in the mid $400s. With 103,760 shares outstanding, this makes for a
market capitalization of about $48 million, a slight premium to book value of $43.8 million.

2017 2016 2015 2014

Total Assets 67,888,784 62,124,184 57,134,742 54,643,352
Stockholders' Equity 43,840,372 37,990,273 30,598,959 40,351,439

Net sales 74,596,108 62,609,562 59,960,425 54,780,439

Gross profit 14,437,893 10,573,034 9,883,869 7,366,120
Net income 6,887,699 7,390,464 -9,757,580 -67,117

Shares outstanding 103,760 106,892 110,019 113,121

In looking at these four year results, note that 2015 had a pension withdrawal expense of $11.9 million.
Since this pertained to past years of service by employees covered by the pension, the one-time
expense overstates past profits and understates the profitability for 2015. Still, even if you adjusted net
income for 2015 to add back that pension charge, the 2016 and 2017 results are far higher and, quite
possibly, outliers. Sales are much higher: you may have noticed a construction boom and lots of cranes
in most of the trendy urban centers in the U.S. (Many of said construction projects are being backed by
Bank of the Ozarks...)

The pattern of the business is that the company buys raw land with deposits to mine, extracts them, and
ships them to markets that are pouring significant quantities of concrete (Boston, Manchester), where
they mix the concrete to specifications and truck it to the job. They are eventually left with depleted
sand and gravel pits. At that point, the company sells the land for real estate development. You can
theorize that in an environment of population growth and outward spreading development, sometimes
the sale of land for development will recoup all of or more than the original land purchase price.

One concern with BSND is the organized labor. However, in 2015 the company was able to negotiate a
withdrawal from the “severely underfunded” New England Teamsters and Trucking Industry Pension
Fund. The company agreed to pay $23 million, noninterest-bearing over 30 years, recording a liability
with present value at that time of $11.9 million. As the company said in the 2015 annual report, “this
eliminate[d] the open-ended liability posed by the existing pension plan.”

Another moving part is the steady annual repurchase of approximately 3,000 shares for a million
dollars per year, which is lower than the market price of the shares. According to the footnotes, this
comes from an agreement that was made in March 2010 to settle a dispute with shareholders. The
company agreed to buy back 34,444 shares over time for a total of $11 million. It is not completely
clear, but it seems like this may pertain to the litigation filed by family members. (The case is Boylan v

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Boston Sand and Gravel, in Massachusetts Superior Court.)

The ruling on Boston Sand's motion for summary judgment in that case has some history of the
company and the family members involved. (Lawsuits are one of the key ways that information like
this comes to light.)

In 1957, upon the death of Daniel J. Boylan, Sr., his two sons – Dan and Dean Boylan, Sr. (“Dean, Sr.)
– became substantially equal shareholders in Boston Sand and its various subsidiaries. Dean, Sr.,
however, managed the family businesses; Dan relinquished financial control to his brother. Over the
years, Dean, Sr. increased his family’s ownership in the family corporations to 64 percent, while Dan’s
ownership interest decreased to 23 percent.

So there is a family backstory here that is perhaps not unlike Hanover Foods. The company is currently
run by Dean Jr and Jeanne-Marie Boylan. (Jeanne-Marie gives the tour in the Bob Vila video.) BSND
sends a notice of annual meeting, but not a full-fledged proxy statement, so it is unclear to us what the
ownership structure of the company is currently. The annual meeting was July 26th, it would be great to
attend one year. (Perhaps the company would let shareholder visitors take a tour and get a ride on the
train?)

This type of business has a mini-moat, or as Nate has said in the past, a niche. What prospective
competitor at this point could build a rail line to bring rock from New Hampshire, and then where in
Boston would they put a new ready-mix cement plant? A big problem with the stock of course (as
opposed to the business, which is older than any Oddball reader) is that it is obviously cyclical.
Depending on your view of the business cycle, this may not necessarily be an opportune time to buy
such a company. But given the niche it certainly seems to be worth following.

Coal Creek Company

This one was first mentioned in Issue 18, August 2017 when it was trading at $320. As Nate explained
at the time,

“The land value alone at $384/acre is a bargain. The company’s management indicated to an associate
of mine that they are looking to acquire additional land below $1,000 an acre, and that they would be
willing to unload the entire operation at $3,000 an acre. At $3,000 an acre the company would be
worth $216m, or 6x the current price. Investors have the opportunity at the current price to purchase
the company at a price that’s 70% less than what the company considers a fair price to be. A natural
question might be, “why aren’t they just buying back their own stock instead of looking for land?” The
answer is that they are! Last year they spent $633,430 repurchasing 2,065 shares of stock, at an
average price of $306 per share.”

During 2017 they seriously stepped up the share repurchases. They bought back 8,377 shares for $2.8
million, which after the effect of $2.5 million in comprehensive income reduced book value to $12.7
million. (So they paid an average of $334 per share and the current price is $430 ask.)

The company has a $6.9 million securities portfolio and there is little visibility into it except that it
consists of common stock, mutual funds, and exchange traded funds. The portfolio decreased in size by

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