<PAGE>

                                   UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
                                          
                                          
                                     FORM 10-K


     [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                                         OR

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
          SECURITIES EXCHANGE ACT OF 1934

                FOR THE TRANSITION PERIOD FROM _______TO_______

                        COMMISSION FILE NUMBER 333-14217

                                   ============
                                          
                           CORE-MARK INTERNATIONAL, INC.

               (Exact name of registrant as specified in its charter)
          

          DELAWARE                                                    91-1295550
          (State or other jurisdiction of                       (I.R.S. Employer
          incorporation or organization)                     Identification No.)


          395 OYSTER POINT BOULEVARD, SUITE 415
          SOUTH SAN FRANCISCO, CA                                          94080
          (Address of principal executive offices)                    (Zip Code)


           Registrant's telephone number, including area code: (650) 589-9445
                                          
                                          
           Securities registered pursuant to Section 12(b) of the Act:  NONE


           Securities registered pursuant to Section 12(g) of the Act:  NONE
                                          
     Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.  Yes  X   No 
                                                    ---     ---

     Indicate by check mark if disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-K is not contained herein, and will not be 
contained, to the best of registrant's knowledge, in definitive proxy or 
information statements incorporated by reference in Part III of this Form 
10-K or any amendment to this Form 10-K.  [ X ]
                                          
     As of February 28, 1998, all of the Registrant's voting stock was held 
by affiliates of the Registrant.  (See Item 12.)
                                          
Registrant's Common Stock outstanding at February 28, 1998 was 5,500,000 shares.
                                          
<PAGE>
                     FORWARD-LOOKING STATEMENTS OR INFORMATION

     Certain statements contained in this annual report on Form 10-K under 
the captions "Business" and "Management's Discussion and Analysis of 
Financial Condition and Results of Operations," and elsewhere herein and in 
the documents incorporated herein by reference are not statements of 
historical fact but are future-looking or forward-looking statements that may 
constitute "forward-looking statements" within the meaning of Section 21E of 
the Securities Exchange Act of 1934, as amended. Certain, but not necessarily 
all, of such forward-looking statements can be identified by the use of such 
forward-looking terminology as the words "believes," "expects," "may," 
"will," "should," or "anticipates" (or the negative of such terms) or other 
variations thereon or comparable terminology, or because they involve 
discussions of Core-Mark International, Inc.'s (the "Company") strategy. Such 
forward-looking statements are based upon a number of assumptions concerning 
future conditions that may ultimately prove to be inaccurate. The ability of 
the Company to achieve the results anticipated in such statements is subject 
to various risks and uncertainties and other factors which may cause the 
actual results, level of activity, performance or achievements of the Company 
or the industry in which it operates to be materially different from any 
future results, level of activity, performance or achievements expressed or 
implied by such forward-looking statements. Such factors include, among 
others, the general state of the economy and business conditions in the 
United States and Canada; adverse changes in consumer spending; the ability 
of the Company to implement its business strategy, including the ability to 
integrate recently acquired businesses into the Company; the ability of the 
Company to obtain financing; competition; the level of retail sales of 
cigarettes and other tobacco products; possible effects of legal proceedings 
against manufacturers and sellers of tobacco products and the effect of 
government regulations affecting such products. As a result of the foregoing 
and other factors affecting the Company's business beyond the Company's 
control, no assurance can be given as to future results, levels of activity, 
performance or achievements and neither the Company nor any other person 
assumes responsibility for the accuracy and completeness of these statements.

                                       PART I

ITEM 1.   BUSINESS

GENERAL

     The Company, with annual net sales of almost $2.4 billion in 1997, is 
one of the largest broad-line, full-service wholesale distributors of 
packaged consumer products to the convenience retail industry in western 
North America. The Company's principal customers include traditional and 
petroleum convenience stores, grocery stores, drug stores, mass merchandisers 
and liquor stores. The Company offers its customers a wide variety of 
products including cigarettes, candy, snacks, fast food, groceries, health 
and beauty care products and other general merchandise. 

     The Company's principal markets include the western United States and 
western Canada. The Company services its United States customers from 15 
distribution facilities, seven of which are located in California. In Canada, 
the Company services its customers from four distribution facilities. 

HISTORY

     The Company's origins date back to 1888, when Glaser Bros., a 
family-owned-and-operated candy and tobacco distribution business, was 
founded. In late 1994, the Company repurchased the common stock in the 
Company from its previous ownership. In early 1995, members of senior 
management and certain lenders acquired equity in a new holding company which 
held all of the stock of the Company. In August 1996, the Company completed a 
recapitalization. The Company's equity is now held 75% by Jupiter Partners, 
L.P. ("Jupiter") and 25% by senior management.

INDUSTRY OVERVIEW

     Wholesale distributors provide valuable services to both manufacturers 
of consumer products and convenience retailers. Manufacturers benefit from 
wholesale distributors' broad retail coverage, inventory management and 
efficient processing of small orders. Wholesale distributors provide 
convenience retailers access to a broad product line, the ability to place 
small quantity orders, inventory management and access to trade credit. In 
addition, large full-service wholesale distributors such as the Company offer 
retailers the ability to participate in manufacturer-sponsored marketing 
programs, merchandising and category management services and systems focused 
on minimizing customers' investment in inventory.

                                       1

<PAGE>

     The wholesale distribution industry is highly fragmented and has 
historically consisted of a large number of small, privately-owned businesses 
and a small number of large, full-service wholesale distributors serving 
multiple geographic regions. Relative to smaller competitors, large 
distributors such as the Company benefit from several competitive advantages, 
including purchasing power, the ability to service chain accounts, economies 
of scale in sales and operations, the ability to spread fixed corporate costs 
over a larger revenue base and the resources to invest in Management 
Information Services ("MIS") and other productivity enhancing technology. 
These factors have led to a consolidation of the wholesale distribution 
industry as companies either exit the industry or are acquired by large 
distributors seeking to further leverage their existing operations.

BUSINESS STRATEGY

     The Company's business strategy is to increase net sales and improve 
operating margins. To achieve these goals, the Company intends to: (i) 
increase sales to existing customers, particularly of higher gross margin, 
non-cigarette products; (ii) add new customer locations in existing markets, 
particularly along existing routes; (iii) continue to implement distribution 
productivity enhancement programs; and (iv) make selective acquisitions. 

     INCREASE SALES TO EXISTING CUSTOMERS. Because the Company generally 
carries many products that its typical retail store customer purchases from 
other suppliers, a primary element of its growth strategy is to increase 
sales to existing customers. The Company's typical customer purchases its 
products from the Company, from manufacturers who distribute directly to 
retailers, and from a variety of smaller local distributors or jobbers. The 
Company is particularly focused on becoming the retail customer's primary 
supplier. This will be accomplished by implementing programs designed to 
eliminate the need for secondary means of delivery provided by local 
distributors and jobbers. Such programs are centered on increasing 
non-cigarette sales that provide higher gross margins than those associated 
with the distribution of cigarettes. As part of the effort, the Company 
provides compensation incentives to its sales force as well as a number of 
value-added services and marketing programs to its customers. These programs 
include: (i) Convenience 2000-Registered Trademark-(which offers enhanced 
purchasing power and promotions to independent convenience stores); (ii) 
Smart Sets (which helps ensure that retailers display the right product in 
the right place); (iii) SmartStock-Registered Trademark-(which provides state 
of the art category management for key, high-volume, high-impulse convenience 
retail categories); and (iv) Profit Builder and Promo Power (regular Company 
publications which describe new products and manufacturer promotions).

     ADD NEW CUSTOMER LOCATIONS IN EXISTING MARKETS. The Company also seeks 
to leverage its existing distribution network by securing additional 
customers on existing routes. The Company believes it has many opportunities 
to add additional customers at low marginal distribution costs. The Company 
continues to focus on a number of new trade channels, including hotel gift 
shops, military bases, correctional facilities, college bookstores, movie 
theaters and video rental stores. The Company believes that there is 
significant opportunity to increase net sales and profitability by adding new 
customers and maximizing economies of scale. 

     PRODUCTIVITY ENHANCEMENT PROGRAMS. During the past five years, the 
Company has devoted a significant portion of its capital spending to a 
variety of productivity enhancement programs. These productivity enhancement 
programs include: (i) BOSS, a batch order selection system that increases the 
efficiency and reduces the cost of full-case order fulfillment; (ii) 
Pick-to-Light, a paperless picking system that reduces the travel time for 
the selection of less-than-full-case order fulfillment; (iii) Radio 
Frequency, a hand-held wireless computer technology that eliminates paperwork 
and updates receiving inventory levels and stocking requirements on a 
real-time basis; (iv) Checker Automation, an on-line order verification 
system that has significantly reduced labor costs by automating inspection of 
order accuracy; and (v) fleet management tools such as Roadshow, a software 
program that optimizes the routing of customer deliveries. The Company 
intends to continue to pursue cost reductions by completing the roll-out of 
some of these and other programs. 

     SELECTIVE ACQUISITIONS. The wholesale distribution industry is highly 
fragmented and comprised mainly of a large number of small, privately-held 
businesses. Management believes that the consolidation that has taken place 
in recent years will continue and that numerous attractive acquisition 
opportunities will arise. Given the current utilization rates of the 
Company's existing warehouse and distribution facilities as well as the 
quality of the Company's in-house MIS capability, management believes that a 
significant amount of incremental revenues can be integrated into the 
Company's operations without significant additions to fixed costs.

                                       2 
<PAGE>

PRODUCTS DISTRIBUTED

     The products distributed by the Company include cigarettes, food 
products such as candy, fast food, snacks, groceries and non-alcoholic 
beverages, and non-food products such as film, batteries and other sundries, 
health and beauty care products and tobacco products other than cigarettes. 
Cigarette net sales constituted approximately 67% of the Company's total net 
sales in 1997.
          
     CIGARETTE PRODUCTS

     The Company offers substantially all brands of cigarettes from all of 
the major manufacturers, including national premium labels such as Marlboro, 
Winston and Player; discount labels such as Viceroy and Doral; and deep 
discount labels such as the Company's private label brand, Best 
Buy-Registered Trademark-, as well as Basic, Best Value, Monarch and GPC.

     FOOD AND NON-FOOD PRODUCTS

     The Company offers its customers a wide variety of food and non-food 
products (over 35,000 stock keeping units (SKU's)), including candy, snacks, 
fast food, groceries, non-alcoholic beverages, health and beauty care 
products and general merchandise. The Company's strategy is to offer its 
convenience retail store customers a variety of food and non-food products at 
reasonable prices in flexible quantities.

     FOOD PRODUCTS. The Company's candy products include such brand name 
items as Snickers, Hershey Kisses, M&M's, Lifesavers and Dentyne. The Company 
also offers its own private label "Cable Car"-Registered Trademark- candy 
line. The Company's snack products include brand names such as Keebler, 
Nabisco and Planters.

     The Company's grocery products include national brand name items such as 
Del Monte, Carnation, Kellogg's and Purina ranging from canned vegetables, 
soups, cereals, baby food, frozen foods, soaps and paper products to pet 
foods. The Company offers a variety of non-alcoholic beverages, including 
juices and sports drinks under brand names such as Tropicana, Veryfine and 
Gatorade. 

     The Company's fast food products include prepared sandwiches, hot deli 
foods, slush drinks, hot beverages, pastries and pizza, as well as packaged 
supplies and paper goods, including brand name items such as Superior Coffee, 
Tyson chicken, Oscar Mayer meats and Kraft and Heinz condiments. Since 1994, 
the Company has targeted the fountain, slush, hot beverage (coffee and hot 
chocolate) and frozen food product categories, which present significant 
growth opportunities as sales in these product categories are among the 
fastest growing product offerings of the convenience store industry.

     NON-FOOD PRODUCTS. General merchandise products range from film, tape, 
batteries, cigarette lighters and glue to automotive products and include 
brand names such as Fuji, Kodak, Scotch and Mead Envelope. Health and beauty 
care products include analgesics, hair care, cosmetics, hosiery, dental 
products and lotions, from manufacturers of brand names such as Crest, 
Tylenol, Johnson & Johnson Band-Aid, Vicks, Gillette and Jergens. The 
Company's broad assortment of tobacco products includes imported and domestic 
cigars, smokeless tobacco (snuff), chewing tobacco, smoking tobacco and 
smoking accessories.

CUSTOMERS

     The Company's current customer base is comprised of a wide range of 
retailers, including traditional and petroleum convenience stores, grocery 
stores, drug stores, mass-merchandisers and liquor stores. The Company also 
provides services to hotel gift shops, military bases, correctional 
facilities, college bookstores, movie theaters and video rental stores. In 
1997, the Company's largest customer accounted for 4.0% of net sales, and the 
Company's ten largest customers accounted for approximately 27% of net sales. 
As a result of its size and geographic coverage, the Company supplies a 
number of regional and national chain corporations and, therefore, is able to 
distribute products to all or substantially all such customers' individual 
store locations in the Company's market area.

     The Company strives to offer its customers greater flexibility, service 
and value than other distributors. The Company's willingness to work with 
retailers to arrive at a suitable delivery time, thereby allowing the store 
owner to schedule its labor requirements effectively, is an important facet 
of this flexibility. The Company believes that its ability to provide fully 
integrated technological services (EDI services, store automation 
integration, data exchange, consultative services, retail price management 
systems and UPC control), bar-coded shelf labels to assist in effective shelf 
space management, timely communication of manufacturer price change 
information, seasonal and holiday special product/promotional offerings and 
salesperson assistance in order preparation are also important to the 
retailer in its selection of the Company as its supplier. 

                                       3
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SUPPLIERS AND MANUFACTURERS

     The Company purchases products for resale to its customers from over 
2,400 suppliers and manufacturers located throughout the United States and 
Canada. Although the Company purchases cigarette and tobacco products from 
all major United States and Canadian manufacturers, approximately 29%, 14%, 
12% and 8% of the Company's net sales in 1997 were derived from products 
purchased by the Company from Philip Morris, R.J. Reynolds, Imperial Tobacco 
and Brown & Williamson, respectively. No other supplier's products 
represented more than 10% of net sales. In addition, Philip Morris 
manufactures the Company's private label Best Buy-Registered Trademark- 
cigarettes. The loss of or a major change in the Company's relationships with 
any of these manufacturers or in any of the structured incentive programs 
could have a material adverse effect on the Company's business and financial 
results.

     The Company generally has no long-term purchase agreements (other than 
for Best Buy-Registered Trademark- products) and buys substantially all its 
products as needed.
     
     CIGARETTE PRODUCTS

     The Company controls major purchases of cigarettes centrally in order to 
minimize inventory levels. Daily replenishment of cigarette inventory and 
brand selection is controlled by the local division based on demands of the 
local market. The U.S. cigarette manufacturers charge all wholesale customers 
the same price for national brand cigarettes regardless of volume purchased. 
However, cigarette manufacturers do offer certain structured incentive 
programs (including Philip Morris' Masters Program and R.J. Reynolds' 
Partners Program) to wholesalers instead of the routine allowances associated 
with non-cigarette products. These programs are based upon, among other 
things, purchasing volume and often include performance-based criteria 
related to the quality of the Company's efforts to keep certain brands and 
volumes of cigarettes on the retail shelves.

     FOOD PRODUCTS

     Food products (other than frozen foods) are purchased directly from 
manufacturers by buyers in each of the Company's distribution facilities. 
Management believes that decentralized purchasing of food products results in 
higher service levels, improved product availability tailored to individual 
markets and reduced inventory investment. Although each division has 
individual buyers, the Company negotiates corporate pricing where possible to 
maximize purchasing power. 

     In February 1996, the Company established its Artic Cascade division, a 
consolidated frozen warehouse which purchases frozen foods for all of the 
Company's United States divisions. By consolidating the frozen food 
purchases, the Company is able to obtain such products at lower cost. Buying 
in one location also allows the Company to offer a wide selection of quality 
products to retailers at more competitive prices.

     NON-FOOD PRODUCTS

     The majority of the Company's non-food products, other than cigarettes 
and tobacco products (primarily health and beauty care products and general 
merchandise), are purchased by Allied Merchandising Industry ("AMI"), one of 
the Company's operating divisions that specializes in these categories. This 
specialization seeks to ensure a better selection and more competitive 
wholesale costs and enables the Company to reduce its overall general 
merchandise and health and beauty care inventory levels. Tobacco products, 
other than cigarettes, are purchased directly from the manufacturers by each 
of the divisions. 

DISTRIBUTION

     The Company maintains 19 distribution facilities, of which 15 are 
located in the western United States and four are located in western Canada. 
These distribution facilities include two consolidating warehouse facilities, 
AMI and Artic Cascade. Each distribution facility is outfitted with modern 
equipment (including freezers and coolers as required) for receiving, 
stocking, order selection and loading a large volume of customer orders on 
trucks for delivery. Each facility provides warehouse, distribution, sales 
and support functions for its geographic area under the supervision of a 
division manager. In addition, the Company believes that the majority of its 
distribution facilities have the capacity to absorb significant future growth 
in net sales. 

                                       4
<PAGE>

     The Company's trucking system includes straight trucks and tractors 
(primarily leased by the Company) and trailers (primarily owned by the 
Company). The Company's standard is to maintain its transportation fleet to 
an average age of five years or less. The Company employs a state-of-the-art, 
computerized truck routing system generated by software called "Roadshow" to 
efficiently construct delivery routes.

COMPETITION

     The convenience retail distribution business is comprised of one 
national distributor in the United States (McLane, a subsidiary of Wal-Mart) 
and several national distributors in Canada, a number of large, 
multi-regional competitors (participants with a presence in several 
contiguous regional markets) and a large number of small, privately-owned 
businesses that compete in one or two markets. Multi-regionals include the 
Company in the west, GSC Enterprises in the south and southeast, H.T. Hackney 
in the southeast, and Eby-Brown Company in the midwest. Relative to smaller 
competitors, multi-regional distributors such as the Company benefit from 
several competitive advantages including greater purchasing power, the 
ability to service chain accounts, scale cost advantages in sales and 
warehouse operations, the ability to spread fixed corporate costs over a 
larger revenue base and the resources to invest in both MIS and productivity 
enhancing technology. These factors have led to a consolidation of the 
industry as small competitors exit the industry and some larger convenience 
retail distributors seek acquisitions to increase the utilization of their 
existing operations.

     The Company also competes with wholesale clubs and certain retail stores 
whose sales are primarily cigarettes, characterized by high volumes and very 
aggressive pricing. These competitors have become a factor in the industry 
within recent years, particularly in California markets. The wholesale clubs 
have been aggressive in their pricing of cigarettes and candy, and 
wholesalers have been forced to reduce margins to compete in densely 
populated markets with a large number of wholesale clubs. Wholesale clubs 
require the convenience store owner to take the time to travel, to shop at 
their location, pay cash and choose from a very limited selection. They also 
provide none of the merchandising support that the Company routinely offers. 
Consequently, national chains do not routinely purchase product at the 
wholesale clubs.

     The principal competitive factors in the Company's business include 
price, customer order fill rates, trade credit and the level and quality of 
value-added services offered. Management believes the Company competes 
effectively by offering a full product line, flexible delivery schedules, 
competitive prices, high levels of customer service and an efficient 
distribution network. 

EMPLOYEES

     As of December 31, 1997, the Company had 2,312 employees. 

     The Company is a party to local collective bargaining agreements with 
the International Brotherhood of Teamsters covering clerical, warehouse and 
transportation personnel at its facilities in Hayward, California, and 
covering warehouse and transportation personnel in Las Vegas, Nevada. The 
Company is party to a collective bargaining agreement with United Food 
Commercial Workers covering warehouse and transportation personnel in 
Calgary, Alberta. The Company is a party to a collective bargaining agreement 
with Industrial Wood and Allied Workers of Canada covering warehouse 
personnel in Victoria, British Columbia. The agreements covering employees in 
Hayward and Las Vegas expire on January 15, 2000 and March 31, 1999, 
respectively. The agreement covering employees in Calgary expires on August 
31, 1998. The agreement covering employees in Victoria expires on April 5, 
1999. These agreements cover an aggregate of less than 10% of the Company's 
employees. 

     Management believes that the Company's relations with its employees are 
good. 

ITEM 2.        PROPERTIES

     The Company does not own any real property. The principal executive 
offices of the Company are located in South San Francisco, California, and 
consist of approximately 22,000 square feet of leased office space. In 
addition, the Company leases approximately 24,000 square feet in Vancouver, 
British Columbia for its Canadian regional corporate, tax and management 
information systems departments and 11 small offices for use by sales 
personnel in certain parts of the United States and Canada. The Company also 
leases its 19 distribution facilities, 15 of which are located in the western 
United States and four in western Canada. Each distribution facility is 
equipped with modern equipment (including freezers and coolers at 18 
facilities) for receiving, stocking, order selection and shipping a large 
volume of customer orders. The Company believes that it currently has 
sufficient capacity at its distribution facilities to meet its anticipated 
needs and that its facilities are in satisfactory condition. 

                                       5
<PAGE>

     The Company's leases expire on various dates between 1998 and 2007, and 
in many instances give the Company renewal options. The aggregate rent paid 
in connection with the Company's distribution facilities, regional sales 
offices and corporate and administrative offices was approximately $6.1 
million in 1996 and $6.7 million in 1997. The Company's distribution 
facilities range from 14,000 to 200,000 square feet and account for 
approximately 1.6 million square feet in aggregate. Management believes that 
the Company's current utilization of warehouse facilities is approximately 
70% to 80% in the aggregate. 

ITEM 3.        LEGAL PROCEEDINGS

REGULATORY MATTERS

     The tobacco industry is currently subject to significant regulatory 
restrictions, such as the requirement that product packages display warning 
labels, a prohibition on television and radio advertising and prohibitions on 
sales to minors. In August 1996, the United States Food and Drug 
Administration (the "FDA") determined that it had jurisdiction over 
cigarettes and smokeless tobacco products and issued regulations restricting 
the sale, distribution and advertising of cigarette and smokeless tobacco 
products, especially to minors. The regulations are significant not only 
because of their substance but also because the FDA determined that it has 
jurisdiction over cigarettes and smokeless tobacco as "combination products 
having both a drug component, including nicotine, and device components." The 
regulations regulate such products as "devices." The major tobacco 
manufacturers have challenged the jurisdiction of the FDA to regulate tobacco 
products as "drugs" or "devices," and in April 1997 the U.S. District Court 
for the Middle District of North Carolina held that the FDA could impose 
restrictions on access to tobacco products and on labeling of tobacco 
products, but did not have authority to restrict the promotion and 
advertisement of such products. The court stayed implementation of the FDA 
regulations except for those establishing a federal minimum age of 18 for the 
sale of tobacco products and requiring proof of age for anyone under the age 
of 27. An appeal by both the tobacco companies and the FDA is pending. In 
addition, a number of bills have been introduced in Congress during 1997 and 
1998 that would confirm or expand the FDA's jurisdiction. In addition, in 
recent years, proposals have been made to require additional warning notices 
on tobacco products, to disallow advertising and promotional expenses as 
deductions under federal tax law and to further regulate the production and 
distribution of cigarettes and smokeless tobacco. While neither the FDA 
regulations nor the pending legislation would impose restrictions on the sale 
of cigarettes and smokeless tobacco products to adults, there can be no 
assurance such restrictions will not be proposed in the future or that any 
such proposed legislation or regulations would not result in a material 
reduction of the consumption of tobacco products in the United States or 
would not have a material adverse effect on the Company's business and 
financial position.

     Over the past decade, various state and local governments have imposed 
significant regulatory restrictions on tobacco products, including sampling 
and advertising bans or restrictions, packaging regulations and prohibitions 
on smoking in restaurants, office buildings and public places. Additional 
state and local legislative and regulatory actions are being considered and 
are likely to be promulgated in the future. The Company is unable to assess 
the future effects that these various proposals may have on the sale of the 
Company's products. The FDA's regulation of cigarette and smokeless tobacco 
products does not preempt individual states from issuing more stringent state 
or local requirements, provided those state or local requirements do not 
conflict with the FDA regulations, and a number of state and local 
jurisdictions have applied for exemption from the FDA regulations in order to 
impose such stricter rules.

     The Company is subject to various federal, state and local 
environmental, health and safety laws and regulations. Generally, these laws 
impose limitations on the discharge of pollutants and the presence of 
hazardous substances in the workplace and establish standards for vehicle and 
employee safety and for the handling of solid and hazardous wastes. These 
laws include the Resource Conservation and Recovery Act, the Comprehensive 
Environmental Response, Compensation and Liability Act, the Clean Air Act, 
the Hazardous Materials Transportation Act and the Occupational Safety and 
Health Act. Future developments, such as stricter environmental or employee 
health and safety laws and regulations thereunder, could affect the Company's 
operations. The Company does not currently anticipate that the cost of its 
compliance with or of any foreseeable liabilities under environmental and 
employee health and safety laws and regulations will have a material adverse 
affect on its business and financial condition. 

                                       6
<PAGE>

LEGAL MATTERS

     In May 1996, the Court of Appeals for the Fifth Circuit decertified a 
federal class action purportedly brought on behalf of all cigarette smokers 
in the United States. Following the decertification, lawyers for the class 
brought state class action lawsuits in a number of states, with the objective 
of filing such lawsuits in all fifty states, the District of Columbia and 
Puerto Rico. Several of these state lawsuits name cigarette distributors such 
as the Company as defendants.

     In October 1996, a subsidiary of the Company was named as a defendant in 
a class action lawsuit filed in State Court in New Mexico. The other 
defendants include the principal U.S. tobacco manufacturers as well as other 
distributors. The case is brought on behalf of a putative class of smokers 
who reside in New Mexico, each of whom is allegedly nicotine dependent. The 
suit seeks, on behalf of the class, compensatory damages, punitive damages 
and equitable relief, including medical monitoring of the class members.

     In May 1997, a subsidiary of the Company was named as a defendant in an 
action brought by the Attorney General of New Mexico in an action filed in 
State Court in Santa Fe, New Mexico. The other defendants include the 
principal U.S. tobacco manufacturers as well as other distributors. The 
Attorney General alleges, among other things, that the defendants realized 
significant profits from the manufacture, distribution, and sale of tobacco 
products, and that these activities have caused residents of New Mexico to 
suffer illnesses and diseases. The State of New Mexico seeks both monetary 
damages and a permanent injunction to require defendants to fund public 
education and smoking cessation programs.

     In January 1998, the Company was served with a summons and First Amended 
Complaint in an action brought by Operating Engineers Local 12 Health and 
Welfare Trust (on behalf of itself and all others similarly situated), in the 
United States District Court for the Central District of California, against 
major tobacco manufacturers, the Company, and other distributors and 
retailers of tobacco products. The complaint seeks, inter alia, compensatory 
and punitive damages, restitution for monies expended by the Trust for health 
care of its members who have used tobacco products, and forms of injunctive 
relief.

     In March 1998, the Company was named as a defendant in a class action 
complaint filed in a state court in Salt Lake City, Utah. The other 
defendants include the principal U.S. tobacco manufacturers as well as 
several other distributors. The case is brought on behalf of a class of 
smokers who reside in Utah and who have purchased cigarette products 
distributed by the Company, and alleges, among other things, the members of 
the class have suffered personal injuries and economic losses from the use of 
such cigarettes. The suit seeks, on behalf of the class, compensatory 
damages, punitive damages, equitable relief including the establishment of a 
medical monitoring fund and return of monies spent to purchase cigarette 
products.

     The Company does not believe that these actions will have a material 
adverse effect on the Company's financial condition.  The Company has been 
indemnified with respect to certain claims alleged in each of the above 
actions.

     In addition, the Company is a party to other lawsuits incurred in the 
ordinary course of its business. The Company believes it is adequately 
insured with respect to such lawsuits or that such lawsuits will not result 
in losses material to its consolidated financial position or results of 
operations.

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                       7
<PAGE>

                                      PART II
                                          
ITEM 5.        MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 
MATTERS

     Not applicable.


                                          
ITEM 6.                        SELECTED HISTORICAL 
                       CONSOLIDATED FINANCIAL AND OTHER DATA


     The following table sets forth selected historical consolidated 
financial and other data for the Company. The historical financial data as of 
the end of and for each year in the five year period ended December 31, 1997 
have been derived from the Company's audited consolidated financial 
statements which have been audited by KPMG Peat Marwick LLP, independent 
accountants. Such financial statements for the three year period ended 
December 31, 1997 are included herein together with the report of such 
accountants thereon. The consolidated financial data set forth below should 
be read in conjunction with the historical consolidated financial statements 
of the Company and the related notes thereto and "Management's Discussion and 
Analysis of Financial Condition and Results of Operations," all contained 
elsewhere in this Form 10-K.

                                       8
<PAGE>

                   CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                                SELECTED HISTORICAL 
                       CONSOLIDATED FINANCIAL AND OTHER DATA

<TABLE>
<CAPTION>

                                                                             YEAR ENDED DECEMBER 31,
                                                                                  (IN THOUSANDS)
                                                      ------------------------------------------------------------------------
                                                          1993           1994           1995           1996           1997
                                                      ------------   ------------   ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>            <C>            <C>
STATEMENT OF INCOME DATA:                    
   Net sales (a) . . . . . . . . . . . . .             $1,868,932     $1,855,356     $2,047,187     $2,175,367     $2,395,867
   Costs of goods sold (b) . . . . . . . .              1,704,982      1,719,999      1,901,604      2,017,654      2,216,162
                                                       ----------     ----------     ----------     ----------     ----------
   Gross profit (b). . . . . . . . . . . .                163,950        135,357        145,583        157,713        179,705
   Operating and administrative 
      expenses . . . . . . . . . . . . . .                117,411        116,080        125,245        130,493        148,902
                                                       ----------     ----------     ----------     ----------     ----------
   Operating income (b). . . . . . . . . .                 46,539         19,277         20,338         27,220         30,803
   Interest expense, net . . . . . . . . .                  4,887          5,773          6,987          9,916         18,181
   Debt refinancing costs (c). . . . . . .                     --          1,600          1,065          1,319          1,498
                                                       ----------     ----------     ----------     ----------     ----------
   Income before income taxes,
      cumulative effects of changes
      in accounting principles and
      extraordinary item . . . . . . . . .                 41,652         11,904         12,286         15,985         11,124
   Income tax expense. . . . . . . . . . .                  2,472          2,816          5,563          6,941          4,834
                                                       ----------     ----------     ----------     ----------     ----------
   Income before cumulative effects of
      changes in accounting principles
      and extraordinary item . . . . . . .                 39,180          9,088          6,723          9,044          6,290
   Cumulative effect of changes in 
      accounting principles for:
         Income taxes. . . . . . . . . . .                    492             --             --             --             --
         Postretirement benefits 
           other than pensions . . . . . .                   (988)            --             --             --             --
                                                       ----------     ----------     ----------     ----------     ----------
   Income before extraordinary item. . . .                 38,684          9,088          6,723          9,044          6,290
   Extraordinary item, net of tax. . . . .                     --             --             --         (1,830)            --
                                                       ----------     ----------     ----------     ----------     ----------
   Net income (b). . . . . . . . . . . . .             $   38,684     $    9,088     $    6,723     $    7,214     $    6,290
                                                       ----------     ----------     ----------     ----------     ----------
                                                       ----------     ----------     ----------     ----------     ----------
OTHER DATA:
   EBITDAL (d) . . . . . . . . . . . . . .             $   29,309     $   24,271     $   29,696     $   35,169     $   41,597
   Cash provided by (used in):
      Operating activities . . . . . . . .                 21,176         54,708         12,529         26,621         17,547
      Investing activities . . . . . . . .                 (6,806)        (5,974)       (16,896)        (6,079)       (30,739)
      Financing activities . . . . . . . .                (11,406)       (43,586)        11,397        (18,972)         3,549
   Depreciation and amortization (e) . . .                  5,737          5,541          5,943          6,573          7,528
   Capital expenditures. . . . . . . . . .                  5,501          5,376          7,286          6,079          9,378
      

                                                                                AS OF DECEMBER 31,
                                                                                  (IN THOUSANDS)
                                                      ------------------------------------------------------------------------
                                                          1993           1994           1995           1996           1997
                                                      ------------   ------------   ------------   ------------   ------------

BALANCE SHEET DATA:
   Total assets. . . . . . . . . . . . . .               $329,855       $293,743       $324,536       $329,036       $336,580
   Total debt, including current 
      maturities . . . . . . . . . . . . .                127,053         84,627        101,598        193,463        197,012
   Mandatorily redeemable 
      preferred stock (f). . . . . . . . .                 34,890         41,767             --             --             --
                                          
                                  See Notes to Selected Historical Consolidated Financial and Other Data.

</TABLE>

                                       9
<PAGE>

                  CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                     Notes to Selected Historical Consolidated
                              Financial And Other Data


(a)  In the second quarter of 1995, the Company completed two acquisitions which
     added approximately $62 million in net sales for the year ended
     December 31, 1995. In February 1997, the Company completed the acquisition
     of the Sosnick Companies which added approximately $136 million in net
     sales for the year ended December 31, 1997.

(b)  The Company's U.S. inventories are valued at the lower of cost or market.
     Cost of goods sold is determined on a last-in, first-out (LIFO) basis.
     During the year ended December 31, 1993, the Company's U.S. cigarette
     inventory quantities declined and the wholesale cost of U.S. premium
     cigarettes significantly declined. These factors resulted in a
     substantially lower inventory cost being charged to cost of goods sold
     ("LIFO income") under the LIFO method of valuation compared to the FIFO
     method in an amount of $23.0 million, materially impacting the results of
     operations during such fiscal year. See "Management's Discussion and
     Analysis of Financial Condition and Results of Operations" for more
     information on the impact of the LIFO inventory valuation method on other
     accounting periods.

(c)  Debt refinancing costs include all costs associated with restructuring and
     refinancing debt and amortization of debt issuance costs.

(d)  EBITDAL represents operating income plus depreciation, amortization 
     and LIFO expense, and minus LIFO income (each as defined herein). EBITDAL
     should not be considered in isolation or as a substitute for net income,
     operating income, cash flows or other consolidated income or cash flow data
     prepared in accordance with generally accepted accounting principles, or 
     as a measure of a company's profitability or liquidity. EBITDAL is 
     included because it is one measure used by certain investors to determine
     a company's ability to service its indebtedness. 

(e)  Depreciation and amortization includes depreciation on property and
     equipment, amortization of goodwill and other non-cash charges, and
     excludes amortization of debt refinancing costs. 

(f)  Series B Preferred Stock, with a $50.0 million stated value and a mandatory
     redemption date of December 31, 1995, was issued in conjunction with a
     restructuring in 1991 and was initially recorded at a discounted fair value
     and accreted through March 1995, at which time it was exchanged, along with
     warrants owned by the senior lenders, for equity in a holding company that
     was also owned by certain members of management. At that time, the carrying
     value of the Preferred Stock was reclassified into additional paid-in
     capital.

                                       10
<PAGE>


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                             AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the 
"Selected Historical Consolidated Financial and Other Data" and the 
consolidated financial statements of Core-Mark International, Inc. (the 
"Company") and notes thereto included elsewhere in this Form 10-K.

GENERAL

     The Company is one of the largest broad-line, full-service wholesale 
distributors of packaged consumer products to the convenience retail industry 
in western North America. The products distributed by the Company include 
cigarettes, food products such as candy, fast food, snacks, groceries and 
non-alcoholic beverages, and non-food products such as film, batteries and 
other sundries, health and beauty care products and tobacco products other 
than cigarettes. In the year ended December 31, 1997, approximately 67%, 22% 
and 11% of the Company's net sales were derived from cigarettes, food 
products and non-food products, respectively. 

TOBACCO INDUSTRY BUSINESS ENVIRONMENT

     Manufacturers and distributors of cigarettes and other tobacco products 
in the United States are currently facing a number of significant issues that 
affect the business environment in which they operate including proposed 
additional governmental regulation (see Item 3. "Legal Proceedings - 
Regulatory Matters"); actual and proposed excise tax increases (see "Impact 
of Tobacco Taxes" ); increased litigation involving health and other effects 
of cigarette smoking and other uses of tobacco (see Item 3. "Legal 
Proceedings - Legal Matters"); and proposed legislative action to resolve 
certain regulatory and litigation issues affecting the U.S. tobacco industry 
described below. 

     In June 1997, a so called "national settlement" of many of these issues 
was proposed (referred to herein as the "Proposed Settlement") following 
negotiations among major U.S. tobacco manufacturers, state attorneys general, 
representatives of the public health community and attorneys representing 
plaintiffs in certain smoking and health litigation. The Proposed Settlement 
can be implemented only by federal legislation. The President as well as 
several members of Congress have criticized aspects of the Proposed 
Settlement and certain members of Congress have introduced alternative 
legislation that would substantially increase taxes on tobacco products 
without affording the tobacco manufacturers and other industry participants 
protection from private litigation, which is a significant aspect of the 
Proposed Settlement. At the present time, there can be no assurance that 
federal legislation reflecting the Proposed Settlement will be enacted or if 
changes will be made to the terms of the Proposed Settlement before it is 
enacted. The major U.S. cigarette manufacturers have disclosed in a report 
dated October 8, 1997 to a U.S. Senate task force that, if the Proposed 
Settlement were enacted in its current form, among other things, prices of 
cigarettes would increase significantly and cigarette consumption would 
decline, although it is not possible to forecast , with any degree of 
confidence, the magnitude of the decline in consumption.

     During the most recent five year period, the Company's sales of 
cigarettes were:

<TABLE>
<CAPTION>

     For the year ended                 Cigarettes (in thousands)
       December 31,                     Net Sales        Cartons
     ------------------                 ---------        -------
<S>                                   <C>             <C>
          1993                          $1,344,707       76,740
          1994                           1,299,687       80,703
          1995                           1,446,697       88,933
          1996                           1,505,744       90,897
          1997                           1,603,362       92,368
</TABLE>

     The Company believes that, if the Proposed Settlement were enacted in 
its current form, the Company's business of distributing tobacco products 
would be negatively affected by decreases in the volume of sales of tobacco 
products and by the impact of increases in cigarette prices on its working 
capital (see "Liquidity and Capital Resources"). The Company does not believe 
it is able to quantify the impact that the proposed legislation or other 
future legislation or governmental regulation affecting cigarettes and other 
tobacco products will have on future sales of cigarettes and other tobacco 
products. However, based upon current industry estimates of wholesale price 
increases (including enacted federal excise tax increases (See "Impact of 
Tobacco Taxes")) ranging from $4.00 to $8.00 per carton of cigarettes over 
the next two to three years as a result of the Proposed Settlement, the 
Company believes that it would be able to adequately finance the 
corresponding increase in its working capital requirements relating to its 
existing business under its existing and proposed credit facilities. 

                                       11
<PAGE>

If such price increases were to occur, the Company's debt levels and 
interest expense would significantly increase. However, if the actual 
level of wholesale price increases (including enacted federal excise tax 
increases) exceeds $8 per carton; federal excise taxes were increased to 
levels beyond those which have already been enacted; payment terms for 
state and provincial excise taxes were adversely changed (see "Impact of 
Tobacco Taxes"); or the volume of cigarettes sold by the Company declines 
significantly as a result of higher prices or taxes, or both, the Company 
may be required to seek additional financing in order to meet such higher 
working capital requirements.

     The Company's business strategy has included and continues to include 
increasing sales of higher margin, non-tobacco products, a strategy which is 
intended to lessen the impact of potential future declines in unit sales and 
profitability of its tobacco distribution business.

IMPACT OF LIFO INVENTORY VALUATION METHOD

     The Company's U.S. inventories are valued at the lower of cost or 
market. Cost of goods sold is determined on a last-in, first-out (LIFO) basis 
using Producer Price Indices as determined by the U.S. Department of Labor 
Statistics. The Company's Canadian inventories are valued on a first-in, 
first-out (FIFO) basis. The LIFO method of determining cost of goods sold has 
had a significant impact on the results of operations, which is quantified 
separately in the discussion below. 

     During periods of price inflation in the Company's product line, the 
LIFO methodology generally results in the impact of inflation on year end 
inventories being charged as additional expenses to cost of goods sold 
("LIFO expense") while lower costs are retained in inventories. 
Historically, increases in the Company's cost of cigarettes resulted from 
a combination of cost increases by cigarette manufacturers and increases 
in federal and state excise taxes. In 1995, cigarette and candy 
manufacturers increased prices contributing to LIFO expense of $3.4 
million during 1995. In 1996 and 1997, LIFO expense of $1.4 million and 
$3.3 million, respectively, is primarily the result of increases in 
cigarette prices. 

RESULTS OF OPERATIONS

     The following table sets forth certain operating results as a percentage 
of net sales, for the periods indicated: 

<TABLE>
<CAPTION>

                                                       YEAR ENDED
                                                      DECEMBER 31,   
                                             ------------------------------
                                              1995        1996        1997
                                             ------      ------      ------
<S>                                        <C>         <C>          <C>
     Net Sales                               100.0%      100.0%      100.0%
     Cost of goods sold (a)                   92.9        92.7        92.5
                                             -----       -----       -----
     Gross profit                              7.1         7.3         7.5
     Operating and administrative expenses     6.1         6.0         6.2
                                             -----       -----       -----
     Operating income                          1.0%        1.3%        1.3%
                                             -----       -----       -----
                                             -----       -----       -----
</TABLE>

     (a)   LIFO expense is included in cost of goods sold.

     The following table sets forth gross profit and operating income as a 
percentage of net sales, after adjusting for LIFO expense, for the periods 
indicated: 

<PAGE>

<TABLE>
<CAPTION>

                                                       YEAR ENDED
                                                      DECEMBER 31,   
                                             ------------------------------
                                              1995        1996        1997
                                             ------      ------      ------
<S>                                        <C>         <C>          <C>
     Gross profit                             7.11%       7.25%       7.50%
     LIFO expense                             0.17        0.06        0.14
                                             -----       -----       -----
     Adjusted gross profit                    7.28        7.31        7.64
     Operating and administrative expenses    6.12        6.00        6.21
                                             -----       -----       -----
     Adjusted operating income                1.16%       1.31%       1.43%
                                             -----       -----       -----
                                             -----       -----       -----
</TABLE>

                                       12
<PAGE>

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

     NET SALES. Net sales for 1997 were $2,395.9 million, an increase of 
$220.5 million or 10.1% over 1996. The increase in net sales was due to the 
Sosnick acquisition (which contributed approximately $136 million in sales 
during 1997) and higher net sales of food and non-food products.

     Net sales of cigarettes for 1997 were $1,603.4 million, an increase 
of $97.6 million or 6.5% over 1996. The increase in net sales of 
cigarettes was principally due to the acquisition of the Sosnick 
Companies (which contributed approximately $74 million in cigarette net 
sales in 1997) and an increase in cigarette prices offset by a general 
decline in cigarette unit volume (excluding Sosnick unit volume). The 
Company's total cigarette unit volume in 1997 was 92.4 million cartons, 
an increase of 1.5 million cartons or 1.6% over 1996. The Sosnick acquisition 
contributed approximately 4.8 million in unit sales in 1997, offsetting 
declines in unit volumes in the U.S. and Canada of approximately 3.0 and 
0.4 million cartons, respectively. Unit declines are primarily the result 
of lower cigarette sales by the Company's customer base, and the 
termination of some high volume, marginally profitable cigarette business.

     Net sales of food and non-food products in 1997 were $792.5 million, an 
increase of $122.9 million or 18.4% over 1996. The increase was primarily due 
to the Company's continued focus on increasing food and non-food product 
sales and to the Sosnick acquisition (which contributed approximately $62 
million in net sales in 1997). The increase occurred primarily in fast food 
sales, which increased $29.2 million or 46.1%, candy sales, which grew $28.6 
million or 12.7%, and snack sales, which were higher by $15.4 million or 
39.7%.

     GROSS PROFIT. Gross profit for 1997 was $179.7 million, an increase 
of $22.0 million or 13.9% over 1996. The improvement was primarily due to 
increased gross profits from continued sales growth in the food and 
non-food product categories and the Sosnick acquisition. The gross profit 
margin for the year ended December 31, 1997 increased to 7.5% of net 
sales as compared to 7.3% of net sales for the year ended December 31, 
1996. This increase resulted primarily from the growth in food and 
non-food sales (which carry significantly higher margins than cigarettes) 
to 33.1% of the Company's total 1997 net sales, from 30.8% for 1996. In 
1997, the Company recognized LIFO expense of $3.3 million compared to 
$1.4 million in 1996. This increase in LIFO expense was primarily due to 
several increases in domestic cigarette wholesale prices totaling 
approximately $1.20 per carton during 1997 (compared to $0.40 per carton 
in 1996), which was more than offset by higher profits related to such 
price increases. 

     OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative 
expenses for 1997 were $148.9 million, an increase of $18.4 million or 14.1% 
over 1996. Such expenses for 1997 increased to 6.2% of net sales as compared 
to 6.0% for 1996. The increase reflects approximately $2.4 million (0.1% of 
net sales) of one-time duplicative facility costs as a result of the Sosnick 
acquisition, higher levels of staffing during the initial integration process 
and other integration costs associated with the acquisition. The remaining 
increase in expenses as a percentage of sales is primarily attributable to 
the decline in cigarette volumes and the slightly higher handling costs 
associated with the increased sales growth of the higher margin food and 
non-food product categories.

     OPERATING INCOME. As a result of the factors discussed above, 
operating income for 1997 was $30.8 million, an increase of $3.6 million 
or 13.2% over 1996. As a percentage of net sales, operating income for 
1997 and 1996 remained constant at 1.3%.

     NET INTEREST EXPENSE. Net interest expense for 1997 was $18.2 million, 
an increase of $8.3 million or 83.4% over 1996. This increase resulted from 
an increase in average debt levels and the Company's average interest rate 
primarily due to the recapitalization and senior subordinated note offering 
which occurred in the third quarter of 1996, as well as additional debt 
incurred to finance the Sosnick acquisition.

     DEBT REFINANCING COSTS. The Company successfully completed a refinancing 
and note offering (see "Recapitalization and Note Offering" below) in the 
third quarter of 1996. The costs directly related to such transactions are 
being amortized over the terms of the related debt. Debt refinancing costs 
for 1997 were $1.5 million, compared to $1.3 million in 1996.

                                       13
<PAGE>

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

     NET SALES. Net sales for 1996 were $2,175.4 million, an increase of 
$128.2 million or 6.3% over 1995. The increase was the result of growth in 
all categories of the Company's operations.

     Net sales of cigarettes for 1996 were $1,505.8 million, an increase of 
$59.1 million or 4.1% over 1995. The Company's total cigarette unit volume in 
1996 was 90.9 million cartons, an increase of 2.0 million cartons or 2.2% 
over 1995. This increase was comprised of unit volume growth in both 
the U.S. and Canada. During 1996, prices of U.S. and Canadian cigarettes 
increased slightly, contributing to an increase in cigarette net sales.

     Net sales of food and non-food products in 1996 were $669.6 million, an 
increase of $69.1 million or 11.5% over 1995. This increase was due to the 
Company's focus on increasing food and non-food product sales. The increase 
occurred primarily in candy sales, which increased $19.8 million or 9.7%, 
general merchandise sales, which increased $11.8 million or 27.3%, and fast 
food sales, which increased $5.7 million or 9.9%.

     GROSS PROFIT. Gross profit for 1996 was $157.7 million, an increase of 
$12.1 million or 8.3% over 1995. The improvement resulted primarily from 
growth in food and non-food product categories. For 1996, the Company 
recognized LIFO expense of $1.4 million compared to LIFO expense of $3.4 
million in 1995. Also, in 1996, gross profit margins were impacted by higher 
profits from forward buying of cigarettes and candy in advance of 
manufacturers' price increases.

     OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative 
expenses for 1996 were $130.5 million, an increase of $5.2 million or 4.2% 
over 1995. However, such expenses declined as a percentage of net sales from 
6.1% to 6.0% compared to 1995, as a result of the Company's continued 
aggressive efforts to control costs.

     OPERATING INCOME. As a result of the factors discussed above, operating 
income for 1996 was $27.2 million, an increase of $6.9 million or 33.8% over 
1995. As a percentage of net sales, operating income for 1996 was 1.3%, as 
compared to 1.0% in 1995.

     NET INTEREST EXPENSE. Net interest expense for 1996 was $9.9 million, an 
increase of $2.9 million or 41.9% over 1995. The net increase resulted from 
the additional debt incurred in connection with the Recapitalization 
described below.

     DEBT REFINANCING COSTS. The Company successfully completed a refinancing 
and note offering (see "Recapitalization and Note Offering" below) in the 
third quarter of 1996. The costs directly related to such transactions are 
being amortized over the terms of the debt. Debt refinancing costs for 1996 
were $1.3 million, compared to $1.1 million in 1995.

     EXTRAORDINARY ITEM. During the third quarter of 1996, the Company fully 
repaid its outstanding debt under a previous credit facility (see 
"Recapitalization and Note Offering" below). The early extinguishment of the 
previously existing debt resulted in a one-time extraordinary charge to 
income to write-off unamortized debt refinancing costs of $1.8 million which 
is net of a $1.2 million income tax benefit.

RECAPITALIZATION AND NOTE OFFERING

     On August 7, 1996, the Company completed a recapitalization (the 
"Recapitalization") which resulted in the purchase of newly issued common 
stock of the Company by Jupiter Partners L.P. ("Jupiter") for $41.3 million 
in cash and the redemption of all of the common stock held by three financial 
institutions and a portion of the common stock held by six members of senior 
management ("Senior Management") for $135.0 million in cash and $6.3 million 
initial value of subordinated notes due 2004. Upon completion of the 
Recapitalization, Jupiter and Senior Management owned 75% and 25%, 
respectively, of the outstanding common stock of the Company. Jupiter also 
purchased from the Company an $18.8 million subordinated note due 2004. Both 
of these subordinated notes were repaid prior to December 31, 1996 as 
discussed below. As a result of the Recapitalization, the Company has a total 
shareholders' deficit at December 31, 1996 and 1997.

     In connection with the Recapitalization, the Company entered into a 
credit facility with a group of banks, which initially provided for aggregate 
borrowings of up to $210.0 million, consisting of:  (i) a $35.0 million term 
loan (the "Term Loan"), which was repaid as discussed below and is no longer 
available for reborrowing, and (ii) a revolving credit facility (the 
"Revolving Credit Facility"), under which borrowings up to $175.0 million are 
available (subject to compliance with a borrowing base) for working capital 
and general corporate purposes.

                                       14
<PAGE>

     On September 27, 1996, the Company issued $75.0 million of 11 3/8% 
Senior Subordinated Notes (the "Notes") which mature on September 15, 2003. 
The proceeds of the issuance of the Notes were principally used to repay in 
full the subordinated notes and Term Loan discussed above. Interest on the 
Notes is payable semi-annually on March 15 and September 15 of each year.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's liquidity requirements arise primarily from the funding of 
its working capital needs, capital expenditure programs and debt service 
requirements with respect to the Revolving Credit Facility and the Notes. The 
Company has no mandatory payments of principal on the Notes scheduled prior 
to their final maturity on September 15, 2003, and has no mandatory payments 
of principal scheduled under the Revolving Credit Facility, which matures 
June 30, 2001. The Company has historically financed its operations through 
internally generated funds and borrowings under its credit facilities. 

     Significant increases in the cost of cigarettes to the Company would 
occur if legislation were approved to enact the Proposed Settlement (See 
"Tobacco Industry Business Environment"). Based upon current industry 
estimates of wholesale price increases (including enacted federal excise 
tax increases (see "Impact of Tobacco Taxes")) ranging from $4.00 to 
$8.00 per carton of cigarettes over the next two to three years as a 
result of the Proposed Settlement, the Company believes that it will be 
able to adequately finance the corresponding increase in its working 
capital requirements relating to its existing business under its existing 
and proposed credit facilities. If such price increases were to occur, 
the Company's debt levels and interest expense would significantly 
increase. However, if the actual level of wholesale price increases 
(including enacted federal excise tax increases) exceeds $8 per carton; 
federal excise taxes were increased to levels beyond those which have 
already been enacted; payment terms for state and provincial excise taxes 
were adversely changed (see "Impact of Tobacco Taxes"); or the volume of 
cigarettes sold by the Company declines significantly as a result of 
higher prices or taxes, or both, the Company may be required to seek 
additional financing in order to meet such higher working capital 
requirements.

     The Company's debt obligations totaled $197.0 million at December 31, 
1997, a slight increase of $3.5 million or 1.8% from $193.5 million at 
December 31, 1996. As of December 31, 1997, the amount outstanding under the 
Revolving Credit Facility was $122.0 million; an additional $36.7 million, 
after taking into account the borrowing base, was available to be drawn. The 
net increase in outstanding debt is due primarily to an increase in working 
capital funding requirements resulting principally from increases in accounts 
receivable and inventory, primarily as a result of the Sosnick acquisition. 
Debt requirements are generally the highest at December 31 when the Company 
historically carries higher inventory. 

     The Company's principal sources of liquidity are net cash provided by 
operating activities and its Revolving Credit Facility. In 1997, net cash 
provided by operating activities was $17.6 million as compared to $26.6 
million in 1996. The decrease resulted principally from changes in net 
working capital. In 1995, net cash provided by operating activities was $12.5 
million. The increase from 1995 to 1996 resulted principally from a $6.9 
million increase in operating income and changes in net working capital.

     As discussed in Note 10, "Acquisition of the Sosnick Companies", to the 
Consolidated Financial Statements, on February 3, 1997, the Company acquired 
certain assets and the business of the Sosnick Companies. The assets acquired 
included trade accounts receivable, inventories and warehouse equipment that 
the Company is using in its business. The aggregate purchase price for the 
assets and business acquired was $21.4 million. The acquisition was financed 
primarily by borrowings under the Company's existing Revolving Credit 
Facility. The total amount of incremental borrowings required to acquire the 
Sosnick Companies at closing was $18.4 million. The remaining purchase price 
was due and payable in installments subsequent to closing in varying amounts 
specified in the purchase agreement. 

     The Company made capital expenditures of $9.4 million in 1997. In 1998, 
the Company estimates it will spend approximately $8 million for capital 
requirements, principally consisting of warehouse facilities and other 
equipment.

                                       15
<PAGE>

     The Company intends to consummate a series of transactions to securitize 
its U.S. trade accounts receivable portfolio in early 1998. In connection 
with this proposed transaction, the Company will form a wholly-owned special 
purpose, bankruptcy-remote subsidiary, to which the U.S. trade accounts 
receivable originated by the Company will be sold, without recourse. The 
receivables will be assigned to a trust, as collateral for the issuance of up 
to $75 million of fixed amount term certificates and variable certificates. 
The revolving period of the securitization is expected to expire in January 
2003, or earlier based on certain events. The initial net proceeds of this 
transaction will be used to reduce the balance outstanding under the 
Revolving Credit Facility. In connection with this proposed transaction, the 
Company will modify its Revolving Credit Facility. The modification is 
expected to reduce the available credit commitment facility from $175 million 
to a proposed $100 million and extend the maturity through 2003. As a result 
of this modification, the Company is expected to write off approximately $1.2 
million of unamortized refinancing costs related to the Revolving Credit 
Facility in 1998. The Company expects to realize lower interest rates as a 
result of these transactions, as compared to its current Revolving Credit 
Facility.

     The Company is currently in the process of modifying or replacing its 
computer systems for the year 2000 compliance. This activity is expected to 
continue through 1999, and is not expected to have a material impact on the 
financial position or results of operations of the Company in any given year. 
However, due to the interrelated nature of computer systems, the Company may 
be impacted in the year 2000 depending on whether entities not affiliated 
with the Company have addressed this issue successfully. Expenses related to 
this process are being expensed as incurred.

IMPACT OF TOBACCO TAXES

     State and Canadian provincial tobacco taxes represent a significant 
portion of the Company's net sales and cost of goods sold attributable to 
cigarettes and other tobacco products. During 1997, such taxes on cigarettes 
represented approximately 26% of cigarette net sales in the U.S. and 47% in 
Canada. In general, such taxes have been increasing, and many states and 
Canadian provinces are currently weighing proposals for higher excise taxes 
on cigarettes and other tobacco products.

     Under current law, almost all state and Canadian provincial taxes are 
payable by the Company under credit terms which, on the average, exceed the 
credit terms the Company has approved for its customers to pay for products 
which include such taxes. This practice has benefited the Company's cash 
flow. If the Company were required to pay such taxes at the time such 
obligation was incurred without the benefit of credit terms, the Company 
would incur a substantial permanent increase in its working capital 
requirements and might be required to seek additional financing in order to 
meet such higher working capital requirements. Consistent with industry 
practices, the Company has secured a bond to guarantee its tax obligations to 
those states requiring such a surety (a majority of states in the Company's 
operating areas). 

     The U.S. federal excise tax on cigarettes is currently $2.40 per carton 
of cigarettes. In August 1997, legislation was enacted that will raise the 
federal excise tax by $1.00 per carton of cigarettes starting in the year 
2000 and by an additional $.50 per carton of cigarettes in 2002. Unlike the 
state and provincial taxes described above, U.S. federal excise taxes on 
cigarettes are paid by the cigarette manufacturers and passed through to the 
Company as a component of the cost of cigarettes. Such increases in U.S. 
federal taxes increase the Company's working capital requirements by 
increasing the balances of its inventories and accounts receivable. The 
President as well as various members of Congress have suggested additional 
excise taxes on cigarette and tobacco products, either as part of the 
proposed legislative resolution of various issues affecting the U.S. tobacco 
industry discussed above or to finance unrelated federal spending. If the 
actual level of wholesale cigarette price increases (including enacted 
federal excise taxes) exceeds $8.00 per carton over the next two to three 
years or if federal excise taxes were increased to levels beyond those which 
have already been enacted, the Company may be required to seek additional 
financing in order to meet its higher working capital requirements.

CURRENCY FLUCTUATIONS

     During 1997, on average, the Canadian dollar weakened approximately 
1.5%, decreasing the U.S. dollar value of Canadian revenues in the Company's 
consolidated financial statements. During 1996, on average, the Canadian 
dollar strengthened less than 1%, increasing the U.S. dollar value of 
Canadian revenues in the Company's consolidated financial statements. The 
change in the U.S./Canadian exchange rate had no impact on the overall 
financial results of the Canadian operations as virtually all revenues and 
expenses are Canadian dollar based. 

                                       16
<PAGE>

INFLATION

     In response to increases or decreases in manufacturers' prices with 
respect to any of the Company's products, the Company historically has 
adjusted its selling price in order to maintain its gross profit. Therefore, 
inflation and deflation generally do not have a material impact on the 
Company's gross profit. However, as described in "Tobacco Industry Business 
Environment," significant increases in the manufacturers' prices of 
cigarettes would occur if the Proposed Settlement described therein were to 
be enacted or if additional federal excise taxes are enacted. While the Company 
expects to pass on to its customers any price increases that result from the 
Proposed Settlement or federal excise tax increases, it is not possible to 
predict, with any degree of confidence, the magnitude of any volume decline 
which might result from the higher prices. In addition, during the past 
several years, low levels of overall inflation and resulting low interest 
rates have benefited the Company's results of operations because of the 
Company's high degree of leverage. If interest rates increase (as a result of 
increased inflation or otherwise), the Company could be adversely affected.

NEW ACCOUNTING STANDARDS

     In 1997, the Financial Accounting Standards Board ("FASB") issued 
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting 
Comprehensive Income," which prescribes standards for reporting comprehensive 
income and its components. Comprehensive income consists of net income or 
loss for the current period and other comprehensive income (income, expenses, 
gains and losses that currently bypass the income statement and are reported 
directly in a separate component of equity). SFAS 130 requires that 
components of comprehensive income be reported in a financial statement that 
is displayed with the same prominence as other financial statements. SFAS 130 
is effective for financial statements issued for periods beginning after 
December 15, 1997, and is expected to first be reflected in the Company's 
first quarter of 1998 interim financial statements.

     In 1997, the FASB issued Statement of Financial Accounting Standards No. 
131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related 
Information." SFAS 131 changes the way companies report segment information 
and requires segments to be determined and reported based on how management 
measures performance and makes decisions about allocating resources. SFAS 131 
is effective for financial statements issued for periods beginning after 
December 15, 1997, and will first be reflected in the Company's financial 
statements for the year ended December 31, 1998.

                                       17
<PAGE>

ITEM 8.   FINANCIAL STATEMENTS

     
                                                                            PAGE
                                                                            ----
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . .    19

Consolidated Balance Sheets as of December 31, 1996 and 1997 . . . . . . .    20

Consolidated Statements of Income for the years ended December 31, 1995, 
  1996 and 1997  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    21

Consolidated Statements of Shareholders' Equity for the years ended 
  December 31, 1995, 1996 and 1997 . . . . . . . . . . . . . . . . . . . .    22

Consolidated Statements of Cash Flows for the years ended December 31, 
  1995, 1996 and 1997. . . . . . . . . . . . . . . . . . . . . . . . . . .    23

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . .    24


                                                  18
<PAGE>

                            INDEPENDENT AUDITORS' REPORT


TO THE BOARD OF DIRECTORS
CORE-MARK INTERNATIONAL, INC.:

     We have audited the accompanying consolidated balance sheets of 
Core-Mark International, Inc. and subsidiaries (the "Company") as of December 
31, 1997 and 1996, and the related consolidated statements of income, 
shareholders' equity and cash flows for each of the years in the three-year 
period ended December 31, 1997. These consolidated financial statements are 
the responsibility of the Company's management. Our responsibility is to 
express an opinion on these consolidated financial statements based on our 
audits. 

     We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for our opinion. 

     In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of Core-Mark 
International, Inc. and subsidiaries as of December 31, 1997 and 1996, and 
the results of their operations and their cash flows for each of the years in 
the three-year period ended December 31, 1997, in conformity with generally 
accepted accounting principles.

                                   /S/  KPMG Peat Marwick LLP


SAN FRANCISCO, CALIFORNIA
FEBRUARY 20, 1998

                                       19
<PAGE>

                   CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS
                             DECEMBER 31, 1996 AND 1997
                             (IN THOUSANDS OF DOLLARS)


<TABLE>
<CAPTION>


                                                                          1996            1997  
                                                                      ------------    ------------
ASSETS
<S>                                                                   <C>           <C>
Current assets:
     Cash . . .  . . . . . . . . . . . . . . . . . . . . . . . .        $ 25,769       $ 15,281
     Receivables:            
          Trade accounts, less allowance for doubtful
               accounts of $3,881 and $2,950, respectively . . .          88,715         96,610
          Other. . . . . . . . . . . . . . . . . . . . . . . . .          12,229         12,806
     Inventories, net of LIFO allowance of $12,452 and 
          $15,718, respectively. . . . . . . . . . . . . . . . .          99,342        103,246
     Prepaid expenses and other. . . . . . . . . . . . . . . . .           6,214          5,847
                                                                        --------       --------
          Total current assets . . . . . . . . . . . . . . . . .         232,269        233,790

Property and equipment:
     Equipment . . . . . . . . . . . . . . . . . . . . . . . . .          38,587         47,587
     Leasehold improvements. . . . . . . . . . . . . . . . . . .           7,947          9,046
                                                                        --------       --------

                                                                          46,534         56,633
     Less accumulated depreciation and amortization. . . . . . .         (24,006)       (28,633)
                                                                        --------       --------
          Net property and equipment . . . . . . . . . . . . . .          22,528         28,000

Other assets   . . . . . . . . . . . . . . . . . . . . . . . . .           9,792          8,277
Goodwill, net of accumulated amortization of
     $15,220 and $17,293, respectively . . . . . . . . . . . . .          64,447         66,513
                                                                        --------       --------
                                                                        $329,036       $336,580
                                                                        --------       --------
                                                                        --------       --------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Trade accounts payable. . . . . . . . . . . . . . . . . . .        $ 51,572       $ 50,737
     Cigarette and tobacco taxes payable . . . . . . . . . . . .          43,912         43,506
     Income taxes payable. . . . . . . . . . . . . . . . . . . .             454          1,085
     Deferred income taxes . . . . . . . . . . . . . . . . . . .           7,397          7,599
     Other accrued liabilities . . . . . . . . . . . . . . . . .          30,653         28,647
                                                                        --------       --------
          Total current liabilities. . . . . . . . . . . . . . .         133,988        131,574

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .         193,463        197,012
Other accrued liabilities and deferred income taxes. . . . . . .           8,585          9,030
                                                                        --------       --------
     Total liabilities . . . . . . . . . . . . . . . . . . . . .         336,036        337,616

Commitments and contingencies:

Shareholders' deficit:
     Common stock; $.01 par value; 10,000,000 shares authorized;
          5,500,000 shares issued and outstanding. . . . . . . .              55             55
     Additional paid-in capital. . . . . . . . . . . . . . . . .          26,121         26,121
     Accumulated deficit . . . . . . . . . . . . . . . . . . . .         (28,576)       (22,286)
     Cumulative currency translation adjustments . . . . . . . .          (1,608)        (2,879)
     Additional minimum pension liability. . . . . . . . . . . .          (2,992)        (2,047)
                                                                        --------       --------
     Total shareholders' deficit . . . . . . . . . . . . . . . .          (7,000)        (1,036)
                                                                        --------       --------
                                                                        $329,036       $336,580
                                                                        --------       --------
                                                                        --------       --------

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>

                                       20
<PAGE>

                   CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF  INCOME
                FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
                             (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>


                                                                        1995           1996           1997    
                                                                     ----------     ----------     ----------
<S>                                                                <C>            <C>            <C>
Net sales  . . . . . . . . . . . . . . . . . . . . . . . . . . .     $2,047,187     $2,175,367     $2,395,867
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . .      1,901,604      2,017,654      2,216,162
                                                                     ----------     ----------     ----------
     Gross profit. . . . . . . . . . . . . . . . . . . . . . . .        145,583        157,713        179,705

Operating and administrative expenses. . . . . . . . . . . . . .        125,245        130,493        148,902
                                                                     ----------     ----------     ----------
     Operating income. . . . . . . . . . . . . . . . . . . . . .         20,338         27,220         30,803

Interest expense, net. . . . . . . . . . . . . . . . . . . . . .          6,987          9,916         18,181
Debt refinancing costs . . . . . . . . . . . . . . . . . . . . .          1,065          1,319          1,498
                                                                     ----------     ----------     ----------
     Income before income taxes and 
        extraordinary item . . . . . . . . . . . . . . . . . . .         12,286         15,985         11,124

Income tax expense . . . . . . . . . . . . . . . . . . . . . . .          5,563          6,941          4,834
                                                                     ----------     ----------     ----------
     Income before extraordinary item. . . . . . . . . . . . . .          6,723          9,044          6,290

Extraordinary item - loss on early 
     extinguishment of debt, net of income 
     tax benefit of $1,220 . . . . . . . . . . . . . . . . . . .             --         (1,830)            --
                                                                     ----------     ----------     ----------

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .     $    6,723     $    7,214     $    6,290
                                                                     ----------     ----------     ----------
                                                                     ----------     ----------     ----------

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

</TABLE>




                                       21
<PAGE>



                                CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF  SHAREHOLDERS' EQUITY
                            FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
                                (IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>

                                                  COMMON STOCK                               CUMULATIVE    ADDITIONAL     TOTAL  
                                              -------------------  ADDITIONAL                 CURRENCY      MINIMUM   SHAREHOLDERS'
                                                SHARES              PAID-IN   ACCUMULATED   TRANSLATION     PENSION      EQUITY
                                              OUTSTANDING  AMOUNT   CAPITAL     DEFICIT      ADJUSTMENT    LIABILITY    (DEFICIT)
                                              -----------  ------  ---------  -----------   -----------    ---------   -----------
<S>                                           <C>          <C>     <C>        <C>           <C>           <C>          <C>
Balance, December 31, 1994 . . . . . . . .        5,297      $ --    $87,579    $ (42,513)    $ (1,954)   $ (3,766)    $39,346

Net income . . . . . . . . . . . . . . . .           --        --         --        6,723           --          --       6,723
Additional minimum
 pension liability . . . . . . . . . . . .           --        --         --           --           --         187         187
Foreign currency                                                                                                              
 translation adjustments . . . . . . . . .           --        --         --           --          641          --         641
Increase in carrying                                                                                                          
 value of preferred stock. . . . . . . . .           --        --     (1,271)          --           --          --      (1,271)
Exchange of capital stock  . . . . . . . .       (5,197)       --     42,043           --           --          --      42,043
                                              ---------      ----    -------    ---------     --------    --------     -------
Balance, December 31, 1995 . . . . . . . .          100        --    128,351      (35,790)      (1,313)     (3,579)     87,669
                                                                                                                              
Net income . . . . . . . . . . . . . . . .           --        --         --        7,214           --          --       7,214
Additional minimum                                                                                                            
 pension liability . . . . . . . . . . . .           --        --         --           --           --         587         587
Foreign currency                                                                                                              
 translation adjustments . . . . . . . . .           --        --         --           --         (295)         --        (295)
Recapitalization:                                                                                                             
  Issuance of new $.01 par                                                                                                    
   value common. . . . . . . . . . . . . .           27        --     41,250           --           --          --      41,250
  Repurchase of old $.01 par                                                                                                  
   value common. . . . . . . . . . . . . .          (91)       --   (141,250)          --           --          --    (141,250)
  Stock split:  155,000 for 1. . . . . . .    5,499,964        55        (55)          --           --          --          --
  Transaction costs . . . . .. . . . . . .           --        --     (2,175)          --           --          --      (2,175)
                                              ---------      ----    -------    ---------     --------    --------     -------
Balance, December 31, 1996 . . . . . . . .    5,500,000        55     26,121      (28,576)      (1,608)     (2,992)     (7,000)
                                                                                                                              
Net income . . . . . . . . . . . . . . . .           --        --         --        6,290           --          --       6,290
Additional minimum                                                                                                            
 pension liability . . . . . . . . . . . .           --        --         --           --           --         945         945
Foreign currency                                                                                                              
 translation adjustments . . . . . . . . .           --        --         --           --       (1,271)         --      (1,271)
                                              ---------      ----    -------    ---------     --------    --------     -------
BALANCE, DECEMBER 31, 1997 . . . . . . . .    5,500,000      $ 55    $26,121    $ (22,286)    $ (2,879)   $ (2,047)    $(1,036)
                                              ---------      ----    -------    ---------     --------    --------     -------


The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

</TABLE>


                                       22
<PAGE>


                   CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
                             (IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>


                                                                               1995           1996           1997
                                                                           -------------   ----------    ------------
<S>                                                                       <C>             <C>            <C>
CASH PROVIDED BY
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $ 6,723        $ 7,214        $ 6,290
  Adjustments to reconcile net income to
     net cash provided by operating activities:
       LIFO expense. . . . . . . . . . . . . . . . . . . . . . . . . .          3,415          1,376          3,266
       Amortization of goodwill. . . . . . . . . . . . . . . . . . . .          1,978          1,978          2,073
       Depreciation and amortization . . . . . . . . . . . . . . . . .          3,965          4,595          5,455
       Amortization of debt refinancing fees . . . . . . . . . . . . .          1,065          1,319          1,498
       Extraordinary loss on early extinguishment of debt. . . . . . .             --          1,830             --
       Deferred income taxes . . . . . . . . . . . . . . . . . . . . .           (769)           901          1,912
       Other adjustments for non-cash and
          non-operating activities . . . . . . . . . . . . . . . . . .            869            235           (557)
     Changes in operating assets and liabilities, net of acquisitions:
       (Increase) decrease in trade accounts receivable. . . . . . . .         (3,789)         2,790            690
       (Increase) decrease in other receivables. . . . . . . . . . . .         (2,699)         1,094           (679)
       (Increase) decrease in inventories. . . . . . . . . . . . . . .         (3,285)        (4,096)            69
       Increase in prepaid expenses and other. . . . . . . . . . . . .         (2,122)        (1,006)           (52)
       Increase (decrease) in trade accounts payable . . . . . . . . .         (3,303)         4,410           (253)
       Increase in cigarette and tobacco taxes payable . . . . . . . .          2,975          3,368            453
       Increase (decrease) in other accrued 
          liabilities and income taxes payable . . . . . . . . . . . .          7,506            613         (2,618)
                                                                             --------       --------       --------
Net cash provided by operating activities. . . . . . . . . . . . . . .         12,529         26,621         17,547
                                                                             --------       --------       --------
INVESTING ACTIVITIES:
  Additions to property and equipment. . . . . . . . . . . . . . . . .         (7,286)        (6,079)        (9,378)
  Net assets of acquired businesses. . . . . . . . . . . . . . . . . .         (9,610)            --        (21,361)
                                                                             --------       --------       --------
Net cash used in investing activities. . . . . . . . . . . . . . . . .        (16,896)        (6,079)       (30,739)
                                                                             --------       --------       --------

FINANCING ACTIVITIES:
  Issuance of senior subordinated notes. . . . . . . . . . . . . . . .             --         75,000             --
  Net borrowings under revolving credit agreement. . . . . . . . . . .         16,971         16,865          3,549
  Debt refinancing fees. . . . . . . . . . . . . . . . . . . . . . . .         (5,379)        (8,662)            --
  Net proceeds from sale of common stock . . . . . . . . . . . . . . .             --         39,075             --
  Purchases of common shares . . . . . . . . . . . . . . . . . . . . .           (195)      (141,250)            --
                                                                             --------       --------       --------
Net cash provided by (used in) financing activities. . . . . . . . . .         11,397        (18,972)         3,549
                                                                             --------       --------       --------

Effects of changes in foreign exchange rates . . . . . . . . . . . . .            337           (248)          (845)
                                                                             --------       --------       --------
Increase (decrease) in cash. . . . . . . . . . . . . . . . . . . . . .          7,367          1,322        (10,488)
Cash, beginning of year. . . . . . . . . . . . . . . . . . . . . . . .         17,080         24,447         25,769
                                                                             --------       --------       --------
CASH, END OF YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . .       $ 24,447       $ 25,769       $ 15,281
                                                                             --------       --------       --------
                                                                             --------       --------       --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments during the year for:
  Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         $6,739        $ 6,732        $17,937
  Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .          6,903          7,427          2,301

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

</TABLE>


                                       23
<PAGE>

                  Core-Mark International, Inc. and Subsidiaries 
                    Notes to Consolidated Financial Statements 
               For the Years Ended December 31, 1995, 1996 and 1997



1. ORGANIZATION AND FORM OF BUSINESS 

     Core-Mark International, Inc. and subsidiaries (the "Company") is a 
full-service wholesale distributor of tobacco, food and other consumer 
products to convenience stores, grocery stores, mass merchandisers and liquor 
and drug stores in western North America. 

     On March 2, 1995, the Company's common and preferred shareholders 
contributed their equity interest in the Company in exchange for the equity 
interest in a newly formed limited liability company, Core-Mark L.L.C. 
("LLC"). Accordingly, the LLC became the Company's sole common shareholder.

     On August 7, 1996, the Company completed a recapitalization as described 
in Note 3. Upon completion of the recapitalization, and at December 31, 1996 
and December 31, 1997, Jupiter Partners L.P. owned 75% and senior management 
retained ownership of 25%, respectively, of the outstanding stock of the 
Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

     These financial statements have been prepared on the accrual basis of 
accounting in accordance with generally accepted accounting principles. This 
requires management to make estimates and assumptions that affect the 
reported amounts of assets and liabilities and disclosure of contingent 
assets and liabilities at the date of the financial statements and the 
reported amounts of revenues and expenses during the reporting period. Actual 
results could differ from those estimates. Management believes any 
differences resulting from estimates will not have a material effect on the 
Company's consolidated financial position. 

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the Company and its wholly 
owned subsidiaries. All significant intercompany balances and transactions 
are eliminated. 

     FOREIGN CURRENCY

     Assets and liabilities of the Company's Canadian operations are translated
at exchange rates in effect at year-end. Income and expenses have been
translated at average rates for the year. Adjustments resulting from such
translation are included in cumulative currency translation adjustments, a
separate component of shareholders' equity. 

      EXCISE TAXES

     State and provincial excise taxes paid by the Company on cigarettes were 
$466.5 million, $479.2 million, and $505.4 million, for the years ended 
December 31, 1995, 1996 and 1997, respectively, and are included in net 
sales and cost of goods sold. 
     
     INVENTORIES

     Inventories are valued at the lower of cost or market. In the U.S., cost 
is determined on a last-in, first-out (LIFO) basis (using Producer Price 
Indices as determined by the Department of Labor and Statistics). Under LIFO, 
current costs of goods sold are matched against current sales. Inventories in 
Canada amount to $23.8 million and $20.3 million at December 31, 1996 and 
1997, respectively, and are valued on a first-in, first-out (FIFO) basis. 

     During periods of rising prices, the LIFO method of costing inventories 
generally results in higher current costs being charged against income while 
lower costs are retained in inventories. An increase in cost of goods sold 
and a decrease in inventories of $3.4 million, $1.4 million and $3.3 million 
resulted from using the LIFO method for the years ended December 31, 1995, 
1996 and 1997, respectively. 

                                       24
<PAGE>

Core-Mark International, Inc.
Notes to Consolidated Financial Statements



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     PROPERTY AND EQUIPMENT

     Property and equipment are recorded at cost, net of accumulated 
depreciation and amortization. Depreciation and amortization are provided on 
the straight-line method over the estimated useful lives of owned assets. The 
estimated useful lives for equipment are principally 4 to 10 years. Leasehold 
improvements are amortized over the estimated useful life of the property or 
over the term of the lease, whichever is shorter. 

     GOODWILL

     Goodwill, which is the excess of purchase price over fair value of net 
assets acquired, is amortized on a straight-line basis over a forty-year 
period. Amortization expense for each of the years ended December 31, 1995 
and 1996 was $2.0 million and for the year ended December 31, 1997 was $2.1 
million.

     The Company assesses the recoverability of long-lived assets, including 
goodwill, by determining whether the amortization of such assets over the 
remaining life can be recovered through undiscounted future operating cash 
flows of the related operations. Based on this calculation, the Company is of 
the opinion that there is no impairment of long-lived assets as of December 
31, 1997.
     
     REVENUE RECOGNITION

     The Company recognizes revenue at the time the product is shipped to the 
customer. 

     STOCK-BASED COMPENSATION PLAN

     In 1997, the Company adopted a Stock Option Plan for its key employees. 
The Company has elected to follow Accounting Principles Board Opinion No. 25, 
"Accounting for Stock Issued to Employees" ("APB 25") and related 
interpretations in accounting for its employee stock options. Under APB 25, 
because the exercise price of the Company's employee stock options equals the 
market price of the underlying stock on the date of grant, no compensation 
expense is recognized. The Company has adopted the disclosure-only provisions 
of Statement of Financial Accounting Standards No. 123 ("SFAS 123"), 
"Accounting for Stock-Based Compensation."
     
     PENSION COSTS AND OTHER POSTRETIREMENT BENEFIT COSTS

     Pension costs and other postretirement benefit costs charged to earnings 
are determined on the basis of annual valuations by an independent actuary. 
Adjustments arising from plan amendments, changes in assumptions and 
experience gains and losses are amortized over the expected average remaining 
service life of the employee group.
     
     RECLASSIFICATIONS

     Prior years' amounts in the consolidated financial statements have been 
reclassified where necessary to conform to the current year's presentation. 

3. CAPITAL TRANSACTIONS

     AUGUST 7, 1996 RECAPITALIZATION

     On August 7, 1996, the Company completed a recapitalization (the 
"Recapitalization") which resulted in the purchase of newly issued common 
stock of the Company by Jupiter Partners L.P. ("Jupiter") for $41.3 million 
in cash, the redemption of all of the common stock held by three financial 
institutions and a portion of the common stock held by six members of senior 
management for $135.0 million in cash and $6.3 million initial value of 
subordinated notes due 2004. Pursuant to the stock subscription agreement 
between the Company and Jupiter, the Company paid an affiliate of Jupiter an 
advisory fee of $2.2 million on August 7, 1996. Upon completion of the 
Recapitalization, Jupiter and senior management owned 75% and 25%, 
respectively, of the outstanding common stock of the Company. Jupiter also 
purchased from the Company an $18.8 million subordinated note due 2004. Both 
of these subordinated notes were repaid during 1996 using the proceeds of the 
senior subordinated notes discussed in Note 4.

                                       25
<PAGE>

Core-Mark International, Inc.
Notes to Consolidated Financial Statements


3. CAPITAL TRANSACTIONS (CONTINUED)

     Simultaneously with the closing of the stock purchase and the 
redemptions, the Company fully repaid the outstanding debt under the 
previously existing credit facility. The early extinguishment of the 
previously existing debt resulted in a one-time extraordinary charge to 
income to write-off unamortized debt refinancing costs of $1.8 million, which 
is net of a $1.2 million income tax benefit.

     MARCH 2, 1995 EXCHANGE OF CAPITAL STOCK

     On March 2, 1995, the Company's common and preferred shareholders 
contributed their equity interest, including common stock, preferred stock, 
and warrants, in the Company for the equity interest in the LLC, which became 
the sole shareholder of the Company. As a result of this exchange, the 
carrying value of the preferred stock, net of transaction costs, $42.0 
million, was reclassified to additional paid-in capital, increasing total 
common shareholder's equity.

4. FINANCING 

     Long-term debt consisted of the following at December 31 (in thousands): 

<TABLE>
<CAPTION>
                                          1996      1997      
                                        --------  --------
<S>                                  <C>         <C>
     Revolving credit facility          $118,463  $122,012
     Senior subordinated notes            75,000    75,000
                                        --------  --------

          Long-term debt                $193,463  $197,012
                                        --------  --------
                                        --------  --------
</TABLE>

     EXISTING CREDIT FACILITY

     On August 7, 1996, the Company entered into the existing credit facility 
which replaced the previous credit facility. The existing credit facility 
initially provided for aggregate borrowings of up to $210.0 million, 
consisting of: (i) a $35.0 million term loan (the "Term Loan"), which was 
repaid as discussed below and is no longer available for reborrowing, and 
(ii) a revolving credit facility (the "Revolving Credit Facility"), under 
which borrowings in the amount of up to $175.0 million are available for 
working capital and general corporate purposes. The Revolving Credit Facility 
expires on June 30, 2001 and borrowings are subject to borrowing base 
limitations based upon levels of eligible inventories, accounts receivable, 
other receivables and cash. Included in this facility are letters of credit 
up to a maximum of $40.0 million. As of December 31, 1997, the amount 
outstanding under the Revolving Credit Facility was $122.0 million; an 
additional $36.7 million, after taking into account the borrowing base, was 
available to be drawn.


     Under the existing credit facility, the Company has the option to 
borrow: (i) under Revolving Credit Loans which bear interest at 1.5% above 
the bank's Prime Rate; or (ii) Eurodollar Loans which bear interest at 2.5% 
above the bank's Eurodollar Rate. The bank's Prime Rate and Eurodollar Rate 
was 8.50% and 5.97%, respectively, at December 31, 1997. There is a 
commitment fee of 0.5% on the unused portion of the working capital revolving 
credit facility. The obligations are secured by all assets of the Company, 
including inventories, trade accounts receivable and property and equipment. 

     Under the existing credit facility, the Company must maintain certain 
financial covenants as prescribed in the credit agreement, including, but not 
limited to, current ratio, net worth, leverage and interest coverage, and 
operating income before certain non-cash items. The existing credit facility 
limits certain activities of the Company, including, but not limited to, 
indebtedness, creation of liens, acquisitions and dispositions, capital 
expenditures, investments and dividends. 

     The Canadian credit facility allows for borrowings up to $10.0 million 
for general corporate use and is secured by letters of credit under the 
existing credit facility. The Canadian dollar advances bear interest at the 
Canadian bank's prime rate which was 6.00% at December 31, 1997. There were 
no borrowings under this facility at December 31, 1996 and 1997. 

     The Company had letters of credit of $9.0 million and $8.3 million 
outstanding at December 31, 1996 and 1997, respectively. The letters of 
credit are issued primarily to secure the Company's bond and insurance 
programs. The Company pays fees of 2.50% per annum on the outstanding portion 
of letters of credit. 

                                       26

<PAGE>

Core-Mark International, Inc.
Notes to Consolidated Financial Statements


4. FINANCING (CONTINUED)

     The Company incurred approximately $8.7 million for legal, professional, 
and other costs related to the structuring of the existing credit facility 
and issuance of the senior subordinated notes described below. These costs 
were capitalized and classified as other assets and are being amortized on a 
straight-line basis over the term of the existing credit facility. 
Amortization of these costs for the years ended December 31, 1996 and 1997 
was approximately $0.6 million and $1.5 million, respectively. 

     SENIOR SUBORDINATED NOTES
     
     On September 27, 1996, the Company issued $75.0 million of 11 3/8% 
Senior Subordinated Notes (the "Notes") which mature on September 15, 2003, 
the proceeds of which were used to repay in full the Term Loan discussed 
above and the subordinated notes discussed in Note 3. Interest on the Notes 
is payable semi-annually on March 15 and September 15 of each year. The Notes 
limit certain activities of the Company, including, but not limited to, 
changes in control, indebtedness, creation of liens, acquisitions and 
dispositions, investments and dividends.

5. COMMITMENTS AND CONTINGENCIES 

     LEASES

     The Company leases the majority of its sales and warehouse distribution 
facilities, automobiles and trucks under lease agreements expiring at various 
dates through 2007, excluding renewal options. The leases generally require 
the Company to pay taxes, maintenance and insurance. Management expects that 
in the normal course of business, leases that expire will be renewed or 
replaced by other leases. 

     Future minimum rental payments under non-cancelable operating leases 
(with initial or remaining lease terms in excess of one year) were as follows 
as of December 31, 1997 (in thousands): 

<TABLE>
<S>                                              <C>
     1998.......................................   $10,835
     1999.......................................     9,300
     2000.......................................     7,290
     2001.......................................     6,340
     2002.......................................     4,324
     Thereafter.................................     6,269
                                                   -------
          Total minimum lease payments..........    44,358
          Less minimum sublease rental income...    (1,494)
                                                   -------
                                                   $42,864
                                                   -------
                                                   -------
</TABLE>

     Rental expense for operating leases was $11.3 million, $11.7 million and 
$13.3 million for the years ended December 31, 1995, 1996 and 1997, 
respectively. 

     CLAIMS AND ASSESSMENTS

     The Company and its subsidiaries are defendants to claims seeking 
damages for injuries allegedly arising from the use of tobacco products. The 
Company has been indemnified with respect to certain claims in each of the 
lawsuits regarding tobacco products. The Company and its subsidiaries are 
also defendants to claims arising in the ordinary course of business. 
Management has provided reserves it believes are adequate and is of the view 
that the disposition of these matters will not have a material adverse effect 
on the Company's consolidated financial position. 

6. EMPLOYEE BENEFIT PLANS 

     PENSION PLAN

     The Company sponsors a defined benefit pension plan for qualified 
employees. As of September 30, 1986, the plan was frozen and plan 
participants ceased accruing benefits as of that date. The most recent 
actuarial valuation of the plan was performed as of January 1, 1997. 

                               27
<PAGE>

Core-Mark International, Inc.
Notes to Consolidated Financial Statements


6. EMPLOYEE BENEFIT PLANS  (CONTINUED)

     The following table sets forth the funded status of the plan and amounts
recognized in the Company's consolidated balance sheets as of December 31 (in
thousands): 

<TABLE>
<CAPTION>

                                                              1996      1997
                                                           --------- ---------
<S>                                                     <C>         <C>
     Interest cost . . . . . . . . . . . . . . . . . .     $  1,062  $  1,072
     Return on assets. . . . . . . . . . . . . . . . .       (1,110)   (1,820)
     Net other components. . . . . . . . . . . . . . .          344     1,051
                                                           --------  --------
        Net periodic pension cost. . . . . . . . . . .          296       303
                                                           --------  --------
                                                           --------  --------

     Accumulated benefit obligation. . . . . . . . . .       14,642    14,791
     Plan assets at estimated fair value . . . . . . .       13,767    14,558
                                                           --------  --------
                                                                875       233
     Prepaid pension cost. . . . . . . . . . . . . . .        2,117     1,814
                                                           --------  --------
        Additional minimum pension liability 
          (a reduction of shareholders' equity). . . .     $  2,992  $  2,047
                                                           --------  --------
                                                           --------  --------

     Weighted average discount rate. . . . . . . . . .        7.50%     7.50%
     Expected long-term rate of return on assets . . .        7.50%     7.50%
</TABLE>


     The additional minimum pension liability is equal to the accumulated 
benefit obligation in excess of plan assets at estimated fair value, plus 
prepaid pension costs. 

     POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

     The Company sponsors a defined benefit postretirement health care plan 
for qualified employees. As of September 30, 1986, the plan was frozen and is 
only available to those who qualify for the pension plan as described 
previously in this note. The plan pays stated percentages of most necessary 
medical expenses incurred by retirees, after subtracting payments by Medicare 
or other providers and after a stated deductible has been met. Participants 
become eligible for the benefit if they retire from the Company after 
reaching age 55 with 5 or more years of service and qualify under the Company 
defined benefit pension plan. The plan is contributory, with retiree 
contributions adjusted annually. The Company does not fund this plan. 

     The components of the expense under Statement of Financial Accounting 
Standards No. 106 ("SFAS 106") "Employers' Accounting for Postretirement 
Benefits Other Than Pensions" are summarized in the following table for the 
years ended December 31 (in thousands): 

<TABLE>
<CAPTION>


                                                                                1996          1997
                                                                             ---------     ---------
<S>                                                                        <C>            <C>
     Service cost benefits attributed to service during the period . . . .    $    34       $     37
     Interest cost on accumulated postretirement benefit obligation. . . .        136            145
     Other components. . . . . . . . . . . . . . . . . . . . . . . . . . .         52             48
                                                                              -------       --------
          Net postretirement health care cost. . . . . . . . . . . . . . .    $   222       $    230
                                                                              -------       --------
                                                                              -------       --------

</TABLE>

     The accumulated postretirement benefit obligation is summarized in the 
following table at December 31 (in thousands): 

<TABLE>
<CAPTION>
                                                                                1996          1997
                                                                             ---------     ---------
<S>                                                                        <C>            <C>
     Retirees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 1,103       $  1,137
     Other fully eligible participants . . . . . . . . . . . . . . . . . .        328            349
     Other active participants . . . . . . . . . . . . . . . . . . . . . .        506            577
                                                                              -------        -------
          Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,937          2,063
     Prior service cost. . . . . . . . . . . . . . . . . . . . . . . . . .        202            185
     Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . .     (1,070)        (1,048)
                                                                              -------        -------
          Accrued postretirement benefit liability . . . . . . . . . . . .    $ 1,069        $ 1,200
                                                                              -------        -------
                                                                              -------        -------
</TABLE>

                                       28

<PAGE>

Core-Mark International, Inc.
Notes to Consolidated Financial Statements


6. EMPLOYEE BENEFIT PLANS (CONTINUED)


     For measurement purposes, a 11% annual rate of increase in the per 
capita cost of covered health care claims was assumed for 1997; the rate was 
assumed to decrease gradually to 6% for 2002, and remain at that level 
thereafter. The health care cost trend rate assumption has a significant 
effect on the amounts reported. Increasing the assumed health care cost trend 
rates by 1% in each year would increase the accumulated postretirement 
benefit obligation as of December 31, 1997 by $371,000 and the aggregate of 
the service and interest cost components of net postretirement health care 
cost for the year ended December 31, 1997 by $35,000. The weighted-average 
discount rate used in determining the accumulated postretirement benefit 
obligation was 7.5%. 

     SAVINGS PLAN

     The Company maintains defined contribution plans in the U.S., subject to 
Section 401(k) of the Internal Revenue Code, and in Canada, subject to the 
Department of National Revenue Taxation Income Tax Act. Eligible employees 
may elect to contribute on a tax deferred basis from 1% to 10% of their 
compensation. A contribution of up to 6% is considered to be a "basic 
contribution" and the Company makes a matching contribution of $0.50 for each 
dollar of a participant's basic contribution. The Company's contributions to 
the plans were $953,000, $1,017,000 and $1,158,000 for 1995, 1996 and 1997, 
respectively.

     STOCK-BASED COMPENSATION PLAN

     During 1997, the Company adopted a Stock Option Plan ("Option Plan") for 
its key employees, which provides for equity-based incentive awards. Upon 
adoption of the Option Plan, the Company had 300,000 options available for 
granting. Granted options vest over five years and become exercisable after 
eight years, with certain exercise acceleration provisions, including a 
change of control of the Company or an initial public stock offering. The 
Company issues options to employees with a grant price equal to the fair 
value. Accordingly, no compensation expense has been recognized on the 
Company's Option Plan. 

     During 1997, the Company granted 213,000 options with an exercise price 
of $10.00, of which 2,000 were forfeited during the year. The Company had 
211,000 options outstanding at December 31, 1997 with an exercise price of 
$10.00 and a weighted-average remaining contractual life of seven years. As 
of December 31, 1997, the options granted under the Option Plan have not 
become exercisable.

     Pro forma information regarding net income is required by SFAS 123, and 
has been determined as if the Company had accounted for its employee stock 
options under the fair value method of this statement. The fair value for the 
options was estimated at the date of grant using a Black-Scholes option 
pricing model with the following assumptions: risk free interest rate of 
5.76%; volatility of 0.00%; dividend yield of 0.00%; and an expected life of 
the option of 5 years. The weighted-average estimated fair value per option 
granted in 1997 was $2.47. For the purpose of pro forma disclosure, the 
estimated fair value of the options is amortized to expense over the options' 
vesting period. Based on these assumptions, pro forma net income for 1997 
would be $6,186,000.

















7.   INCOME TAXES

     The Company's income tax expense, before extraordinary items, consists 
of the following for the years ended December 31 (in thousands): 

<TABLE>
<CAPTION>

                                             1995      1996      1997
                                            ------    ------    ------
<S>                                        <C>       <C>       <C>
     Current:
       Federal . . . . . . . . . . . . .    $4,625    $4,648    $1,646
       State . . . . . . . . . . . . . .     1,218     1,220       648
       Foreign . . . . . . . . . . . . .       489       172       628
                                            ------    ------    ------
                                             6,332     6,040     2,922
     Deferred:
       Federal . . . . . . . . . . . . .      (990)      733     1,565
       State . . . . . . . . . . . . . .        53       (45)      181
       Foreign . . . . . . . . . . . . .       168       213       166
                                            ------    ------    ------
                                              (769)      901     1,912
                                            ------    ------    ------
     Income tax expense. . . . . . . . .    $5,563    $6,941    $4,834
                                            ------    ------    ------
                                            ------    ------    ------
</TABLE>

                                       29

<PAGE>

Core-Mark International, Inc.
Notes to Consolidated Financial Statements


7.    INCOME TAXES (CONTINUED)

     A reconciliation between the Company's income tax expense and income 
taxes computed by applying the statutory federal income tax rate to income 
before income taxes and extraordinary items is as follows for the years ended 
December 31 (in thousands): 

<TABLE>
<CAPTION>


                                                                      1995      1996      1997
                                                                     ------    ------    ------
<S>                                                                <C>        <C>       <C>
     Expected federal income tax expense at the statutory rate .     $4,300    $5,595    $3,894
     Increase (decrease) in taxes resulting from:
          Goodwill amortization. . . . . . . . . . . . . . . . .        692       692       692
          State income tax expense, net of federal taxes . . . .        684       952       673
          Other, net . . . . . . . . . . . . . . . . . . . . . .       (113)     (298)     (425)
                                                                     ------    ------    ------
     Income tax expense. . . . . . . . . . . . . . . . . . . . .     $5,563    $6,941    $4,834
                                                                     ------    ------    ------
                                                                     ------    ------    ------
</TABLE>

     Deferred tax assets and liabilities are measured using enacted tax rates 
expected to apply to taxable income in the years in which those temporary 
differences are expected to be recovered or settled. The tax effects of 
significant temporary differences which comprise deferred tax assets and 
liabilities are as follows at December 31 (in thousands):

<TABLE>
<CAPTION>


                                                                                1996      1997
                                                                               -------   -------
<S>                                                                           <C>        <C>
     Deferred tax assets:
          Net operating loss carryforwards . . . . . . . . . . .               $ 9,864   $ 8,908
          Employee benefits, including postretirement benefits .                 4,543     3,419
          Other. . . . . . . . . . . . . . . . . . . . . . . . .                 5,326     4,615
                                                                               -------   -------
               Total deferred tax assets . . . . . . . . . . . .                19,733    16,942
          Less valuation allowance . . . . . . . . . . . . . . .                (9,310)   (7,742)
                                                                               -------   -------
               Net deferred tax assets . . . . . . . . . . . . .                10,423     9,200
                                                                               -------   -------

     Deferred tax liabilities:
          Inventories. . . . . . . . . . . . . . . . . . . . . .                 8,927     8,722
          Other. . . . . . . . . . . . . . . . . . . . . . . . .                 9,807    10,671
                                                                               -------   -------
               Total deferred tax liabilities. . . . . . . . . .                18,734    19,393
                                                                               -------   -------
               Net deferred tax liability. . . . . . . . . . . .               $ 8,311   $10,193
                                                                               -------   -------
                                                                               -------   -------
</TABLE>

     In assessing the realizability of deferred tax assets, management 
considers whether it is more likely than not that some portion or all of the 
deferred tax assets will not be realized. At each balance sheet date, a 
valuation allowance has been established against the deferred tax assets 
based on management's assessment. During 1995, 1996 and 1997, the Company 
recorded a reduction of $1.0 million, $1.5 million and $1.6 million, 
respectively in the valuation allowance due to changes in factors affecting 
the realizability of the Company's deferred tax assets including generation 
of taxable income and changes in limitations on utilization of net operating 
loss carryforwards. 

     At December 31, 1997, the Company has available for U.S. federal income 
tax return purposes net operating losses totaling approximately $26.0 
million, subject to certain limitations, which will expire between the years 
2005 and 2007. The Company also has available for U.S. income tax return 
purposes investment tax credits and alternative minimum tax credits totaling 
$0.5 million and $1.1 million, respectively. The investment tax credits 
expire by the year 2000 while the alternative minimum tax credits have an 
indefinite utilization period. 
 
8. FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS 

     The carrying amount for the Company's cash, trade accounts receivable, 
other receivables, trade accounts payable, cigarette and tobacco taxes 
payable and other accrued liabilities approximates fair market value because 
of the short maturity of these financial instruments. 

     The carrying amount of the Revolving Credit Facility, a variable rate 
instrument, approximates fair market value. The rate of interest, which is 
tied to either the bank's Prime Rate or Eurodollar Rate, fluctuates with 
market conditions. The fair value of the Notes, calculated based on quoted 
market prices, was $ 76,875,000 and $79,313,000 at December 31, 1996 and 
1997, respectively.

                                       30
<PAGE>

Core-Mark International, Inc.
Notes to Consolidated Financial Statements


9. SEGMENT INFORMATION 

     The Company's revenues are generated from the distribution of 
cigarettes, tobacco products, candy, food, health and beauty aids, and 
general merchandise. The Company operates in the United States and Canada. 
Foreign and domestic net sales, operating income, and identifiable assets are 
as follows at and for years ended December 31, (in thousands): 

<TABLE>
<CAPTION>

                                           1995           1996         1997
                                        ----------     ----------   ----------
<S>                                    <C>            <C>          <C>
Net Sales:
     United States . . . . . . . .      $1,538,816     $1,639,500   $1,871,149
     Canada. . . . . . . . . . . .         508,371        535,867      524,718
                                        ----------     ----------   ----------
     Total . . . . . . . . . . . .      $2,047,187     $2,175,367   $2,395,867
                                        ----------     ----------   ----------
                                        ----------     ----------   ----------

Operating Income:. . . . . . . . .                               
     United States . . . . . . . .      $   19,411     $   25,822   $   28,706
     Canada. . . . . . . . . . . .             927          1,398        2,097
                                        ----------     ----------   ----------
     Total . . . . . . . . . . . .      $   20,338     $   27,220   $   30,803
                                        ----------     ----------   ----------
                                        ----------     ----------   ----------
Identifiable Assets: . . . . . . .                               
     United States . . . . . . . .      $  257,755     $  250,557   $  277,624
     Canada. . . . . . . . . . . .          49,284         51,752       43,806
     Corporate . . . . . . . . . .          17,497         26,727       15,150
                                        ----------     ----------   ----------
     Total . . . . . . . . . . . .      $  324,536     $  329,036   $  336,580
                                        ----------     ----------   ----------
                                        ----------     ----------   ----------
</TABLE>

10. ACQUISITION OF THE SOSNICK COMPANIES

     On February 3, 1997, the Company consummated a transaction, pursuant to 
a Purchase Agreement dated January 31, 1997, to acquire certain assets and 
the business of two related companies, Melvin Sosnick Company and Capital 
Cigar Company (collectively "Sosnick" or the "Sosnick Companies"), a 
wholesale distributor to the convenience retail market in northern California 
and northern Nevada.

     The assets acquired included trade accounts receivable, inventories and 
warehouse equipment that the Company intends to continue to use in its 
business. The acquisition excluded the assumption of substantially all of the 
liabilities of Sosnick (such as notes payable, trade accounts payable, 
commitments to lease warehouse facilities and other liabilities). The 
acquisition has been accounted for using the purchase method of accounting.

     The purchase price for the assets and the business totaled $21.4 million 
and has been allocated as follows (in thousands):

<TABLE>

<S>                                                <C>
     Accounts receivable, net . . . . . . . . . .  $ 8,613
     Inventory, net . . . . . . . . . . . . . . .    8,224
     Property and equipment . . . . . . . . . . .    1,265
     Goodwill . . . . . . . . . . . . . . . . . .    4,139
     Other assets. . . .. . . . . . . . . . . . .      225
     Liabilities assumed. . . . . . . . . . . . .     (247)
     Other liabilities incurred in connection
        with the acquisition. . . . . . . . . . .     (858)
                                                   -------
     Total purchase price . . . . . . . . . . . .  $21,361
                                                   -------
                                                   -------
</TABLE>

     The excess of the purchase price over the fair value of assets acquired 
and liabilities assumed was $4.1 million and has been recorded as goodwill, 
which will be amortized on a straight-line basis over a period of forty 
years. 

                                       31

<PAGE>

Core-Mark International, Inc.
Notes to Consolidated Financial Statements


10. ACQUISITION OF THE SOSNICK COMPANIES (CONTINUED)

     The acquisition was primarily financed by borrowings under the Company's 
existing revolving credit facility. The total amount of incremental 
borrowings required to acquire Sosnick at closing was $18.4 million. The 
remaining purchase price was due and payable in installments subsequent to 
closing in varying amounts specified in the purchase agreement.

     The Company's net sales for the year ended December 31, 1996 would have 
been $2,409 million if the acquisition had occurred as of January 1, 1996. 
The Company's net sales for the year ended December 31, 1997 would have been 
$2,410 million if the acquisition had occurred as of January 1, 1997. The 
impact of the acquisition on net income before the effect of the 
extraordinary item would not have been material for the years ended December 
31, 1996 and 1997.

11. NEW ACCOUNTING PRONOUNCEMENTS

     In 1997, the Financial Accounting Standards Board ("FASB") issued 
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting 
Comprehensive Income," which prescribes standards for reporting comprehensive 
income and its components. Comprehensive income consists of net income or 
loss for the current period and other comprehensive income (income, expenses, 
gains and losses that currently bypass the income statement and are reported 
directly in a separate component of equity). SFAS 130 requires that 
components of comprehensive income be reported in a financial statement that 
is displayed with the same prominence as other financial statements. SFAS 130 
is effective for financial statements issued for periods beginning after 
December 15, 1997, and is expected to first be reflected in the Company's 
first quarter of 1998 interim financial statements.

     In 1997, the FASB issued Statement of Financial Accounting Standards No. 
131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related 
Information." SFAS 131 changes the way companies report segment information 
and requires segments to be determined and reported based on how management 
measures performance and makes decisions about allocating resources. SFAS 131 
is effective for financial statements issued for periods beginning after 
December 15, 1997, and will first be reflected in the Company's financial 
statements for the year ended December 31, 1998.

                                       32
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
FINANCIAL DISCLOSURE

          (a)  Previous independent accountants

          (1)  (i)   On January 27, 1998, the Registrant determined not to 
                     engage KPMG Peat Marwick LLP as the independent public 
                     accountants for its 1998 fiscal year and has appointed 
                     Deloitte & Touche LLP as its independent public accountants
                     for its 1998 fiscal year.

               (ii)  The reports of KPMG Peat Marwick LLP on the Registrant's 
                     consolidated financial statements for the fiscal years 
                     ended December 31, 1997 and 1996 did not contain an adverse
                     opinion or a disclaimer of opinion and were not qualified 
                     or modified as to uncertainty, audit scope or accounting 
                     principles.

               (iii) The Audit Committee of the Registrant's Board of Directors 
                     recommended the decision to change independent accountants,
                     whose decision was approved by the Board of Directors.

               (iv)  In connection with the audits of the Registrant's 
                     consolidated financial statements for the fiscal years 
                     ended December 31, 1997 and 1996, and through the date of 
                     this report, there were no disagreements with KPMG Peat 
                     Marwick LLP on any matters of accounting principles or 
                     practices, financial statement disclosure, or auditing 
                     scope or procedure, which disagreements if not resolved to 
                     the satisfaction of KPMG Peat Marwick LLP, would have 
                     caused KPMG Peat Marwick LLP to make reference to the 
                     matter in connection with its report.

               (v)   During the Registrant's two most recent fiscal years and 
                     through the date of this report, there were no "reportable 
                     events" as defined in Item 304 (a)(1)(v) of Regulation S-K.

          (2)  The Registrant has received from KPMG Peat Marwick LLP a letter 
               addressed to the Securities and Exchange Commission stating 
               whether or not it agrees with the above statements. The copy of 
               the letter from KPMG Peat Marwick LLP to the Securities and 
               Exchange Commission dated March 20, 1998 is attached hereto as 
               Exhibit 16.1.

     (b)  New Independent Auditors

          (i)   On January 27, 1998, the Registrant determined to engage 
                Deloitte & Touche LLP as its new independent accountants 
                effective for the 1998 fiscal year. During the Registrant's two 
                most recent fiscal years and through January 27, 1998, neither 
                the Registrant nor anyone else on its behalf consulted Deloitte
                & Touche LLP regarding any of the matters or events set forth in
                Item 304 (a)(2)(i) and (ii) of Regulation S-K.

                                       33
<PAGE>
                                          
                                      PART III
                                          
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


     The executive officers and directors of the Company are as follows (as of
December 31, 1997): 

<TABLE>
<CAPTION>

                NAME                 AGE                    POSITION
                ----                 ---                    --------
<S>                                <C>   <C>
Gary L. Walsh....................     56   Chairman, Chief Executive Officer and Director
Robert A. Allen..................     48   President, Chief Operating Officer and Director
Leo Granucci.....................     59   Senior Vice President, Sales and Marketing
Leo F. Korman....................     50   Senior Vice President, Chief Financial Officer and
                                             Secretary
Basil P. Prokop..................     54   President, Canada Division
J. Michael Walsh.................     49   Senior Vice President, Distribution
Thomas A. Berglund...............     37   Director
Terry J. Blumer..................     40   Director
John F. Klein....................     34   Director
John A. Sprague..................     44   Director

</TABLE>
          
     GARY L. WALSH has been Chairman and Chief Executive Officer of the 
Company from 1990 to 1997. Effective January 1, 1998, Mr. Walsh retired from 
his position as Chief Executive Officer. Mr. Walsh served as President from 
1990 until 1996. He has been a director of the Company since 1990.

     ROBERT A. ALLEN has been President and Chief Operating Officer of the 
Company from January 1996 to December 1997. Upon the retirement of Mr. Walsh, 
effective January 1, 1998, Mr. Allen became Chief Executive Officer. Prior to 
1996, he served as Senior Vice President, Distribution from 1992 through 
1995, and as Vice President, Distribution from 1989 to 1992. He has been a 
director of the Company since 1994.

     LEO GRANUCCI has been Senior Vice President, Sales and Marketing since 
1994. Prior thereto, he served for seven years as Executive Vice President of 
Sales and Marketing at Bergen Brunswig, a wholesale pharmaceutical 
distribution company.  

     LEO F. KORMAN has been Senior Vice President and Chief Financial Officer 
since January 1994 and served as Vice President and Chief Financial Officer 
from 1991 to 1994. 

     BASIL P. PROKOP has been President of the Canada Division since 1992. 
Mr. Prokop joined the Company in 1984. 

     J. MICHAEL WALSH has been Senior Vice President, Distribution since 
January 1996. Prior thereto, he served as Senior Vice President, Operations 
since 1992 and served as Vice President, Operations from 1991 to 1992. 

     THOMAS A. BERGLUND has been a director of the Company since August 1996. 
He has been a Vice President at Jupiter since 1994. Prior to that he served 
for three years as an employee of the Invus Group, a privately funded buy-out 
group specializing in food-related companies. 

     TERRY J. BLUMER has been a director of the Company since August 1996. 
Prior to co-founding Jupiter in 1994, Mr. Blumer was associated with Goldman, 
Sachs & Co. for over eight years, most recently as an Executive Director. 

     JOHN F. KLEIN has been a director of the Company since August 1996. He 
has been an associate at Jupiter since November 1995. Prior to that, he 
served for three years as a consultant at Bain & Company, a management 
consulting firm, and as a manager in the Turnaround and Corporate Recovery 
Services Group at Price Waterhouse. 

     JOHN A. SPRAGUE has been a director of the Company since August 1996. 
Prior to co-founding Jupiter in 1994, Mr. Sprague was associated with 
Forstmann Little & Co. for eleven years, most recently as a partner. He is a 
director of Heartland Wireless Communications, Inc. 

                                       34
<PAGE>

     Directors are elected for one year terms and hold office until their 
successors are elected and qualified or until their earlier resignation or 
removal. Executive officers of the Company are appointed by and serve at the 
discretion of the Board of Directors. The only family relationship between 
any of the executive officers or directors is between Gary L. Walsh and J. 
Michael Walsh, who are brothers. 

                                       35
<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION


COMPENSATION OF DIRECTORS

     Directors of the Company do not receive compensation for service as 
directors other than reimbursement for reasonable expenses incurred in 
connection with attending the meetings. 

EXECUTIVE COMPENSATION

     The following table summarizes the compensation paid to the Company's 
chief executive officer and its four other most highly compensated executive 
officers for the years ended December 31, 1997, 1996 and 1995. 

                            SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                         ANNUAL COMPENSATION
                                                                                         -------------------
                                                                                                       OTHER ANNUAL     ALL OTHER
                                                                    FISCAL      SALARY       BONUS     COMPENSATION    COMPENSATION
 NAME AND PRINCIPAL POSITION                                         YEAR        ($)          ($)           ($)        ($)(1)(2)(3)
 ---------------------------                                         ----        ---          ---           ---        ------------
<S>                                                                <C>        <C>           <C>          <C>         <C>
 Gary L. Walsh..............................................         1997     $324,480     $286,510                       $ 3,311
      Chairman and Chief Executive Officer                           1996     $324,000     $309,000                       $ 3,606
                                                                     1995     $311,539     $312,000                       $35,621
      

 Robert A. Allen............................................         1997     $250,000     $ 87,000                       $ 7,203
      President and Chief Operating Officer                          1996     $247,457     $102,000                       $ 7,658
                                                                     1995     $183,601     $132,500                       $38,490
      
 Leo Granucci...............................................         1997     $200,762     $ 74,000                       $ 6,801
      Senior Vice President, Sales and Marketing                     1996     $200,465     $ 50,000                       $ 7,190
                                                                     1995     $192,923     $105,000     $48,677(4)        $ 4,649
      
 Leo F. Korman..............................................         1997     $198,875     $ 74,000                       $ 6,786
      Senior Vice President and Chief Financial Officer              1996     $198,581     $ 95,000                       $ 7,082
                                                                     1995     $190,944     $110,000                       $23,207

      
 J. Michael Walsh...........................................         1997     $191,226    $ 60,000                        $ 6,663
      Senior Vice President, Distribution                            1996     $190,693    $ 52,500                        $ 6,484
                                                                     1995     $177,120    $126,500                        $22,378
</TABLE>


___________

(1)  These figures for 1997 consist of the sum of: (i) Company matching 
     contributions to the Savings Plan (defined below) in the following 
     amounts: Mr. Allen, $4,500; Mr. Granucci, $4,500; Mr. Korman, $4,500; 
     and Mr. J.M. Walsh, $4,440; (ii) life and other insurance premiums in 
     the following amounts: Mr. G.L. Walsh, $3,311; Mr. Allen, $2,703; 
     Mr. Granucci, $2,301; Mr. Korman, $2,286; and Mr. J.M. Walsh, $2,223.

(2)  These figures for 1996 consist of the sum of: (i) Company matching 
     contributions to the Savings Plan in the following amounts: Mr. Allen, 
     $4,750; Mr. Granucci, $4,711; Mr. Korman, $4,620; and Mr. J.M. Walsh, 
     $4,094; (ii) life and other insurance premiums in the following amounts:
     Mr. G.L. Walsh, $3,606; Mr. Allen, $2,908; Mr. Granucci, $2,479; Mr. 
     Korman, $2,462; and Mr. J.M. Walsh, $2,390.

                                       36
<PAGE>

(3)  These figures for 1995 consist of the sum of: (i) Company matching
     contributions to the Savings Plan in the following amounts: Mr. Allen, 
     $4,620; Mr. Granucci, $1,415; Mr. Korman, $4,620; and Mr. J.M. Walsh, 
     $3,976; (ii) life and other insurance premiums in the following amounts: 
     Mr. G.L. Walsh, $4,862; Mr. Allen, $3,111; Mr. Granucci, $3,234; 
     Mr. Korman, $3,207; and Mr. J.M. Walsh, $3,022; and (iii) income received 
     in connection with the cancellation of certain stock options in the 
     following amounts: Mr. G.L. Walsh, $30,759; Mr. Allen, $30,759; Mr. Korman,
     $15,380; and Mr. J.M. Walsh, $15,380.
     
(4)  Consists of relocation expenses.

CERTAIN AGREEMENTS WITH MANAGEMENT

     Each member of Senior Management, constituting the Company's top six 
executive officers, has entered into a Severance and Non-Competition 
Agreement with the Company, dated as of August 7, 1996 (collectively, the 
"Severance and Non-Competition Agreements"), which provides that if the 
employment of such officer party thereto is terminated other than for Cause 
(as defined therein) or other than as a result of such officer's resignation 
for Good Reason (as defined therein), the Company may, in its sole 
discretion, continue to pay to such officer, for a period of up to one year 
following such termination, such officer's base salary as in effect on the 
effective date of such termination. Under the Severance and Non-Competition 
Agreements, each of such officers has agreed not to engage in activities that 
compete with those of the Company (i) while such officer is an employee of 
the Company and (ii) if the Company makes the severance payments described 
above to such officer, for an additional period of one year after such 
employment terminates if such officer's employment with the Company 
terminates for Cause or as a result of his resignation other than for Good 
Reason. 

INDEMNIFICATION AGREEMENTS

     Each of the Company's directors and Mr. Leo F. Korman, the Company's 
Chief Financial Officer, and Ms. Debra L. Varian, the Company's Controller 
(collectively, the "Indemnitees"), is party to an identical indemnification 
agreement with the Company. Pursuant to such agreements, the Company has 
agreed generally to indemnify and hold harmless each Indemnitee against any 
losses incurred in connection with any suit, arbitration or proceeding 
resulting from such Indemnitee's service as an officer, agent, employee or 
director of the Company, provided that the Company will generally not be 
required to indemnify an Indemnitee in connection with losses arising out of 
the Indemnitee's own fraudulent or willful misconduct. Each indemnification 
agreement terminates upon the occurrence of a Change of Control (as defined 
in the agreements) of the Company, provided that the Company's obligations to 
indemnify for events occurring prior to such Change of Control continue. 

THE SAVINGS PLAN

     The Company maintains the Core-Mark International, Inc. Nest Egg Savings 
Plan (the "Savings Plan"), which is a defined contribution plan with a cash 
or deferred arrangement (as described under Section 401(k) of the Internal 
Revenue Code of 1986, as amended). All non-union U.S. employees of the 
Company and its affiliates (unless a bargaining agreement expressly provides 
for participation) are eligible to participate in the Savings Plan after 
completing one year of service. 

     Eligible employees may elect to contribute on a tax deferred basis from 
1% to 10% of their compensation (as defined in the Savings Plan), subject to 
statutory limitations. A contribution of up to 6% is considered to be a 
"basic contribution" and the Company makes a matching contribution of $0.50 
for each dollar of a participant's basic contribution (all of which may be 
subject to certain statutory limitations). 
     
     Each participant has a fully vested (nonforfeitable) interest in all 
contributions made by the individual and all earnings thereon. Each 
participant must be employed at the end of each quarter to receive an 
allocation of matching contribution for the most recent calendar quarter. 

     The amount of Company matching contributions that the following officers 
have accrued in the Savings Plan as of December 31, 1997 is as follows: 
Robert A. Allen $23,956; Leo Granucci $10,626; Leo F. Korman $23,213; and J. 
Michael Walsh $23,839. Gary L. Walsh is not a participant in the Savings 
Plan. 
                                       37
<PAGE>

THE REGISTERED RETIREMENT SAVINGS PLAN (CANADA)

     The Company maintains the Core-Mark International, Inc. Group Retirement 
Savings Plan (Canada) (the "Registered Retirement Savings Plan" or "RRSP"), 
which is a defined contribution plan with a cash or deferred arrangement (as 
described under the Department of National Revenue Taxation Income Tax Act). 
All non-union Canadian employees of the Company and its affiliates (unless a 
bargaining agreement expressly provides for participation) are eligible to 
participate in the Registered Retirement Savings Plan after completing one 
year of service. 

     Eligible employees may elect to contribute on a tax deferred basis from 
1% to 10% of their compensation (as defined in the RRSP), subject to 
statutory limitations. A contribution of up to 6% is considered to be a 
"basic contribution" and the Company makes a matching contribution of $0.50 
for each dollar of a participant's basic contribution (all of which may be 
subject to certain statutory limitations). 

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


     The following table sets forth as of December 31, 1997, certain 
information regarding the beneficial ownership of the common stock of the 
Company (i) by each person who is known by the Company to own beneficially 
more than 5% of the outstanding shares of common stock of the Company, (ii) 
by each of the Company's directors and executive officers, and (iii) by all 
directors and executive officers as a group. The Company believes that the 
beneficial owners of the securities listed below, based on information 
furnished by such owners, have sole investment and voting power with respect 
to all the shares of common stock of the Company shown as being beneficially 
owned by them. 

<TABLE>
<CAPTION>

                                              NUMBER OF
                                              SHARES OF      PERCENTAGE OF
                                             COMMON STOCK    TOTAL SHARES
                                                 OF               OF
                                             THE COMPANY     COMMON STOCK
           NAME AND ADDRESS OF              BENEFICIALLY          OF
           BENEFICIAL OWNERS(a)                OWNED         THE COMPANY
           --------------------             ------------     -----------
<S>                                       <C>               <C>
Jupiter. . . . . . . . . . . . . . . . .      4,125,000           75.0%
Robert A. Allen. . . . . . . . . . . . .        281,875            5.1
Leo Granucci . . . . . . . . . . . . . .        158,125            2.9
Leo F. Korman. . . . . . . . . . . . . .        213,125            3.9
Basil P. Prokop. . . . . . . . . . . . .        164,999            3.0
Gary L. Walsh. . . . . . . . . . . . . .        343,751            6.2
J. Michael Walsh . . . . . . . . . . . .        213,125            3.9
Thomas A. Berglund . . . . . . . . . . .             --             --
Terry J. Blumer. . . . . . . . . . . . .      4,125,000(b)        75.0
John F. Klein. . . . . . . . . . . . . .             --             --
John A. Sprague. . . . . . . . . . . . .      4,125,000(b)        75.0
All directors and executive officers
   as a group (10 persons) (b) . . . . .      5,500,000          100.0%

</TABLE>
___________

(a)  The address for Jupiter, Mr. Berglund, Mr. Blumer, Mr. Klein and Mr. 
Sprague is 30 Rockefeller Plaza, Suite 4525, New York, New York 10112. The 
address for Gary L. Walsh, Mr. Allen, Mr. Granucci, Mr. Korman, Mr. Prokop 
and J. Michael Walsh is 395 Oyster Point Boulevard, Suite 415, South San 
Francisco, California 94080. 

(b)  Represents the shares owned by Jupiter. Messrs. Sprague and Blumer 
exercise investment and voting power over the shares owned by Jupiter and 
accordingly are deemed to "beneficially own" such shares in accordance with 
Rule 13d-3 promulgated under the Exchange Act. Each of Messrs. Blumer and 
Sprague disclaim beneficial ownership of all shares of the Company owned by 
Jupiter, except to the extent of their respective ownership interests in such 
partnership. 

                                       38
<PAGE>

STOCKHOLDERS AGREEMENT

     On August 7, 1996, the Company entered into a Stockholders Agreement 
(the "Stockholders Agreement") with Jupiter and the Senior Management (the 
"Management Stockholders"), which parties constitute all of the Company's 
common stockholders. The Stockholders Agreement (a) places significant 
restrictions on the ability of a Management Stockholder to transfer, pledge 
or otherwise dispose of 60% of his shares of common stock of the Company (the 
"Restricted Shares") prior to the Company's initial public offering of common 
stock, and limits the amount of Restricted Shares that may be sold by such 
Management Stockholder after such initial public offering, (b) restricts the 
ability of a Management Stockholder to pledge his shares of common stock that 
do not constitute Restricted Shares, (c) grants "tag-along" rights (i.e., 
rights to participate in a sale on a PRO RATA basis) to each stockholder in 
connection with the sale (i) by Jupiter of any of its common stock of the 
Company and (ii) by a Management Stockholder of any of his Restricted Shares, 
and (d) grants to Jupiter "drag-along" rights (i.e., the right to require 
Management Stockholders to participate on a PRO RATA basis in a sale by 
Jupiter) with respect to shares of common stock held by the Management 
Stockholders, whether or not Restricted Shares, in connection with a sale by 
Jupiter of common stock constituting at least 1% of the Company's common 
stock. The Stockholders Agreement also grants to the Company, first, and 
Jupiter, second, certain call rights with respect to the purchase of 
Restricted Shares held by a Management Stockholder in the event that, prior 
to the fifth anniversary of the date of the Stockholders Agreement, such 
Management Stockholder's employment with the Company is terminated (other 
than as a result of death, disability or resignation for Good Reason (as 
defined therein)). The call provision also applies in the event such 
Management Stockholder breaches his obligations under the Severance and 
Non-Competition Agreement described under "Certain Agreements with 
Management". The purchase price with respect to such call rights under the 
Stockholders Agreement is the lower of $10 per share and a specified formula 
described therein (the "Repurchase Formula"), in the event the call right 
arises as a result of such Management Stockholder's termination for Cause (as 
defined therein), his resignation other than for Good Reason or a breach of 
his obligations under the Severance and Non-Competition Agreement to which he 
is a party. The purchase price with respect to a call right arising as a 
result of any other employment termination is the Repurchase Formula. Jupiter 
has agreed that neither it nor the Company will exercise their respective 
call rights with respect to the Restricted Shares held by Gary L. Walsh in 
the event that, after December 31, 1997, his employment with the Company is 
terminated without cause or he resigns without cause or for good reason. 

REGISTRATION RIGHTS AGREEMENT

     Pursuant to a Registration Rights Agreement, dated as of August 7, 1996 
(the "Registration Rights Agreement"), the Company granted certain demand 
registration rights to Jupiter and certain "piggy-back" registration rights 
to Jupiter and the Management Stockholders with respect to the sale of common 
stock of the Company held by them. In addition to customary priority cut-back 
provisions relating to underwritten offerings, the Registration Rights 
Agreement imposes limitations on the number of shares of common stock of the 
Company that may be included in a "piggy-back" registration by a Management 
Stockholder. 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


     None.

                                       39
<PAGE>

                                      PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K


(a)  The following financial statements, schedules and exhibits are filed as 
part of this report or are incorporated herein as indicated.

     1.  Financial Statements

     The consolidated financial statements listed in Item 8. Financial 
Statements, which appear on page 18, are included herein.

     2.   Financial Statement Schedule

     The following financial statement schedule of Core-Mark International, 
Inc. for the fiscal years ended December 31, 1995, 1996, and 1997 is filed as 
part of this Report and should be read in conjunction with the Consolidated 
Financial Statements of Core-Mark International, Inc. and subsidiaries.

     Schedule II - Valuation and Qualifying Accounts

     Schedules not listed above have been omitted because they are not 
applicable or are not required or the information required to be set forth 
therein is included in the Consolidated Financial Statements or Notes thereto.

     3.   Exhibits

     The following Exhibits are filed as part of, or incorporated by 
reference into, this Report:

<TABLE>
<CAPTION>

     EXHIBIT
     NUMBER                                EXHIBIT
     -------                               -------
     <S>      <C>
      2.1      Stock Subscription Agreement, dated June 17, 1996, by and among Jupiter
               Partners, L.P., as amended which is incorporated herein by reference
               from Exhibit 2.1 to Core-Mark International, Inc.'s Registration
               Statement on Form S-4 (Registration No. 333-14217).


      2.2      Stock Purchase Agreement, dated June 17, 1996, by and between Core-Mark
               L.L.C. and the Company, as amended which is incorporated herein by
               reference from Exhibit 2.2 to Core-Mark International, Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).
     
     
      3.1      Articles of Incorporation of the Company which are incorporated herein
               by reference from Exhibit 3.1 to Core-Mark International, Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).
     
     
      3.2      By-laws of the Company which are incorporated herein by reference from
               Exhibit 3.2 to Core-Mark International, Inc.'s Registration Statement on
               Form S-4 (Registration No. 333-14217).
     
     
      4.1      Indenture, dated as of September 27, 1996, between the Company and
               Bankers Trust Company as Trustee which is incorporated herein by
               reference from Exhibit 4.1 to Core-Mark International, Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).
     
     
      4.4      Form of Face of Exchange Security which is incorporated herein by
               reference from Exhibit 4.4 to Core-Mark International, Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).
     
     
                                            40
<PAGE>
     
     10.1      Manufacturing Rights Agreement by and among Famous Value Brands, the
               Company, Core-Mark Interrelated Companies, Inc. and C/M Products, Inc.
               which is incorporated herein by reference from Exhibit 10.1 to Core-Mark
               International, Inc.'s Registration Statement on Form S-4 (Registration
               No. 333-14217).
     

     10.2      Manufacturing Agreement for "Best Buy" Cigarettes by and between Famous
               Value Brands and C/M Products, Inc. which is incorporated herein by
               reference from Exhibit 10.2 to Core-Mark International, Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).
     
     
     10.3      Trademark License Agreement by and between Famous Value Brands and Core-Mark 
               Interrelated Companies, Inc. which is incorporated herein by reference from 
               Exhibit 10.3 to Core-Mark International, Inc.'s Registration Statement on 
               Form S-4 (Registration No. 333-14217).
     
     
     10.4      The Credit Agreement, dated August 7, 1996, among the Company, several
               lenders parties thereto and The Chase Manhattan Bank which is
               incorporated herein by reference from Exhibit 10.4 to Core-Mark
               International, Inc.'s Registration Statement on Form S-4 (Registration
               No. 333-14217).
     
     
     10.5      Stockholders Agreement dated as of August 7, 1996, by and among the
               Company and all of the holders of its Common Stock which is incorporated
               herein by reference from Exhibit 10.5 to Core-Mark International, Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).
     
     
     10.6.1    Severance and Noncompetition Agreement, dated August 7, 1996,
               between the Company and Gary L. Walsh which is incorporated herein
               by reference from Exhibit 10.6.1 to Core-Mark International, Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).
     
     
     10.6.2    Schedule of Severance and Non Competition Agreements omitted
               pursuant to Instruction no. 2 to Item 601 of Regulation S-K which
               is incorporated herein by reference from Exhibit 10.6.2 to Core-Mark 
               International, Inc.'s Registration Statement on Form S-4
               (Registration No. 333-14217).
     
     
     10.7      Letter, dated August 7, 1996, from Jupiter Partners LP to Gary L. Walsh
               which is incorporated herein by reference from Exhibit 10.7 to Core-Mark
               International, Inc.'s Registration Statement on Form S-4 (Registration
               No. 333-14217).
     
     
     10.8      Purchase Agreement, dated September 24, 1996, between the Company, Chase
               Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation
               which is incorporated herein by reference from Exhibit 10.8 to Core-Mark
               International, Inc.'s Registration Statement on Form S-4 (Registration
               No. 333-14217).
     
     
     10.9.1    Indemnification Agreement, dated November 12, 1996, between the
               Company and John F. Klein which is incorporated herein by reference
               from Exhibit 10.9.1 to Core-Mark International, Inc.'s Registration
               Statement on Form S-4 (Registration No. 333-14217).
     
     
     10.9.2    Schedule of Indemnification Agreements omitted pursuant to
               Instruction no. 2 to Item 601 of Regulation S-K, which is
               incorporated herein by reference from Exhibit 10.9.2 to Core-Mark
               International, Inc.'s Registration Statement on Form S-4
               (Registration No. 333-14217).
     
                                       41
<PAGE>

     10.9      Purchase agreement dated January 31, 1997 between the Company and Melvin
               Sosnick Company and Capital Cigar Company, incorporated herein by
               reference from Exhibit (i) to Core-Mark International, Inc.'s Current
               Report on Form 8-K filed February 18, 1997 (Registration No. 333-14217).
          
     
     10.10     First Amendment dated as of January 31, 1997 to the Credit
               Agreement dated as of August 7, 1996, incorporated herein by
               reference from Exhibit 10.10 to Core-Mark International, Inc.'s
               Quarterly Report on Form 10-Q filed May 14, 1997 (Registration No.
               333-14217).
     
     
    *10.11     Amendment dated December 31, 1997 to Manufacturing Rights Agreement
               by and among Famous Value Brands, the Company, Core-Mark
               Interrelated Companies, Inc. and C/M Products, Inc.
     

    *10.12     Amendment dated December 31, 1997 to Manufacturing Agreement for
               "Best Buy" Cigarettes by and between Famous Value Brands and C/M
               Products, Inc. 
     

     10.13     Amendment dated December 31, 1997 to Trademark License Agreement by
               and between Famous Value Brands and Core-Mark Interrelated
               Companies, Inc.
     
     
     16        Letter to Securities and Exchange Commission from KPMG Peat Marwick LLP
               dated January 27, 1998 from Exhibit 16 to Core-Mark International Inc.'s
               Current Report on Form 8-K filed January 27, 1998 (Registration No. 333-14217).
     
     
     16.1      Letter to Securities and Exchange Commission from KPMG Peat Marwick LLP
               dated March 20, 1998.
     
     
     21        List of Subsidiaries of the Company which is incorporated herein by
               reference from Exhibit 21 to Core-Mark International, Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).
     
     27        Financial Data Schedule

     *         Portions of these exhibits have been omitted pursuant to an 
               Application for Confidential Treatment filed by the Company 
               with the Commission pursuant to Rule 406 of the Securities 
               Act of 1933, as amended.
</TABLE>

(b)  Reports on Form 8-K
                                          
     None.


                                       42
<PAGE>
                                          
                                          
                                     SIGNATURES
                                          
                                          
     Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Registrant has duly caused this report to be signed 
on its behalf by the undersigned, thereunto duly authorized in the City of 
South San Francisco, California, on March 20, 1998.

                                      CORE-MARK INTERNATIONAL, INC.



                                      By        /s/ Leo F. Korman
                                        ________________________________________
                                        Leo F. Korman, Senior Vice President and
                                              Chief Financial Officer


     Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of the 
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

            SIGNATURE                        TITLE                      DATE
            ---------                        -----                      ----
<S>                                 <C>                        <C>

        /s/ Gary L. Walsh
  _____________________________
          Gary L. Walsh               Chairman and Director          March 20, 1998

       /s/ Robert A. Allen
  _____________________________       President, Chief Executive       
         Robert A. Allen                 Officer and Director        March 20, 1998
                                      

        /s/ Leo F. Korman           Senior Vice President, Chief      
  _____________________________    Financial Officer and Principal        
          Leo F. Korman                  Accounting Officer          March 20, 1998
                                       

     /s/ Thomas A. Berglund
  _____________________________
       Thomas A. Berglund                   Director                 March 20, 1998

       /s/ Terry J. Blumer
  _____________________________
         Terry J. Blumer                    Director                 March 20, 1998

        /s/ John F. Klein
  _____________________________
          John F. Klein                     Director                 March 20, 1998

       /s/ John A. Sprague
 ______________________________
         John A. Sprague                    Director                 March 20, 1998


</TABLE>

                                       43
<PAGE>

                            INDEPENDENT AUDITORS' REPORT
                                          
                                          
To The Board of Directors
Core-Mark International, Inc.

     Under date of February 20, 1998, we reported on the consolidated balance 
sheets of Core-Mark International, Inc. and subsidiaries as of December 31, 
1997 and 1996, and the related consolidated statements of income, 
shareholders' equity and cash flows for each of the years in the three-year 
period ended December 31, 1997.  In connection with our audits of the 
aforementioned consolidated financial statements, we also audited the related 
consolidated financial statement schedule. This financial statement schedule 
is the responsibility of the Company's management.  Our responsibility is to 
express an opinion on this financial statement schedule based on our audits.

     In our opinion, such financial statement schedule, when considered in 
relation to the basic consolidated financial statements taken as a whole, 
presents fairly, in all material respects, the information set forth therein.

                                   /S/  KPMG Peat Marwick LLP



SAN FRANCISCO, CALIFORNIA
FEBRUARY 20, 1998


                                       44
<PAGE>

                                                                     SCHEDULE II

               CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                     VALUATION AND QUALIFYING ACCOUNTS
            FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
                                (IN THOUSANDS)

<TABLE>
<CAPTION>

     
             Column A                    Column B              Column C               Column D       Column E
                                                              Additions
--------------------------------------  ----------     ---------------------------   ----------     ----------
                                         Balance at    Charged to     Charged to                    Balance at
                                         Beginning     Costs and        Other                         End of
           Description                    of Year       Expenses       Accounts      Deductions        Year
--------------------------------------  ----------     ----------     ----------     ----------     ----------
<S>                                    <C>           <C>            <C>            <C>             <C>
 ALLOWANCE FOR DOUBTFUL ACCOUNTS
 Year Ended December 31,
      1995...........................       2,692          1,720              --        (812)(a)         3,600
      1996...........................       3,600            895              --        (614)(a)         3,881
      1997...........................       3,881          1,237              --      (2,168)(a)         2,950

     (a)  Deductions consist of accounts determined to be uncollectible and charged against reserves, net of collections on 
          accounts previously charged off.

-----------------------------------------------------------------------------------------------------------------------------

 DEFERRED TAX ASSET VALUATION
   ALLOWANCE
 Year Ended December 31,
      1995...........................      11,842             --              --      (1,018)(b)        10,824
      1996...........................      10,824             --              --      (1,514)(b)         9,310
      1997...........................       9,310             --              --      (1,568)(b)         7,742

     (b)  Deductions are due to changes in factors affecting the realizability of the Company's deferred tax assets.

</TABLE>

                                       45