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, 2000

                                       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, 2001, 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, 2001 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 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 Core-Mark International,  Inc. (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 net sales of over $3.0  billion in 2000,  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 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 historically
has 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  information  technology  ("IT") 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. The Company attempts
to do  this  by  implementing  programs  designed  to  eliminate  the  need  for
deliveries  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) Tully's to Go (a turnkey food service operation that
maximizes  profit with minimal labor);  (ii) Smart Sets (which helps ensure that
retailers  display the right  product in the right place);  (iii)  SmartStock(R)
(which  provides  state of the art  category  management  for key,  high-volume,
high-impulse  convenience  retail  categories);  and (iv) Promo Power (a Company
publication which offers manufacturer promotions).

     ADD NEW CUSTOMER  LOCATIONS IN EXISTING MARKETS.  The Company also seeks to
leverage  its existing  distribution  network by securing  additional  customers
along 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 on board computers and 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 IT capability,  management believes that a significant amount
of incremental  sales 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 72% of the Company's total net sales in 2000.

     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,  Basic,  GPC and Doral;  and deep
discount labels such as the Company's  private label brand, Best Buy(R), as well
as Best Value and Monarch.

     FOOD AND NON-FOOD PRODUCTS

     The  Company  offers its  customers  a wide  variety  of food and  non-food
products  (approximately  33,000 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(R)  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 ranging
from canned vegetables, soups, cereals, baby food, frozen foods, soaps and paper
products to pet foods from such manufacturers as Del Monte, Carnation, Kellogg's
and Purina. The Company offers a variety of non-alcoholic  beverages,  including
juices,  bottled  water 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.  The Company
targets the 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 2000,  the
Company's  largest  customer  accounted for 4.1% of net sales, and the Company's
ten largest customers  accounted for approximately 25% 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 of 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  (electronic  data  interchange  (EDI)  services,  store
automation integration,  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-
<PAGE>

SUPPLIERS AND MANUFACTURERS

     The  Company   purchases   products  for  resale  to  its  customers   from
approximately  2,200 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 36%, 14%,
9% and 7% of the  Company's  net  sales  in  2000  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(R)  cigarettes.  The loss of or a major  change in the
Company's  relationships  with  any of  these  manufacturers  or in any of their
structured  incentive  programs  (see  Cigarette  Products,  below) could have a
material  adverse  effect on the  Company's  financial  position  or  results of
operations.

     The Company generally has no long-term purchase  agreements (other than for
Best Buy(R) 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' Leaders 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,  manufacturers'
share of sales,  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 geographic regions.  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 region has individual  buyers, the
Company  negotiates  corporate  pricing  where  possible to maximize  purchasing
power.

     The Company's  Artic Cascade  division,  a consolidated  frozen  warehouse,
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 operations,  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.

     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 to efficiently construct delivery routes.

                                      -4-
<PAGE>

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  IT 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  generally  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, 2000, the Company had 2,582 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, which expires
on January 15, 2003, and covering warehouse and transportation  personnel in Las
Vegas,  Nevada,  which  expires  on March 31,  2002.  The  Company is party to a
collective  bargaining  agreement with United Food Commercial  Workers  covering
warehouse and  transportation  personnel in Calgary,  Alberta,  which expires on
August 31,  2001.  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,  which expires April 5, 2002.  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  23,000 square feet in Vancouver,  British Columbia
for its Canadian regional corporate,  tax and information technology departments
and 7 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.

     The Company's  leases expire on various dates between 2001 and 2010, 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 $7.5 million in 1999
and $8.0  million in 2000.  The  Company's  distribution  facilities  range from
28,000 to 194,000 square feet and account for  approximately  1.8 million square
feet in aggregate. Management believes that the Company's current utilization of
warehouse facilities is approximately 70% to 80% in the aggregate.

                                      -5-
<PAGE>

ITEM 3.           LEGAL PROCEEDINGS

REGULATORY AND LEGISLATIVE MATTERS

     Manufacturers and distributors of cigarettes and other tobacco products are
currently  facing a number  of  significant  issues  that  effect  the  business
environment in which they operate  including  proposed  additional  governmental
regulation;  actual and proposed excise tax increases (see Item 7. "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Impact of  Tobacco  Taxes");  increased  litigation  involving  health and other
effects of cigarette smoking and other uses of tobacco; and potential litigation
by the U.S.  Department of Justice to recover  federal  Medicare costs allegedly
connected  to  smoking.  The  tobacco  industry  is also  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 cigarettes and smokeless tobacco products,  especially to minors.
The FDA 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 U.S.  tobacco  manufacturers  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 and 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. On August
14, 1998,  however,  the United  States Court of Appeals for the Fourth  Circuit
reversed  the  decision  of the  District  Court,  finding  that the FDA  lacked
statutory authority to regulate tobacco products altogether.  The FDA's petition
for review was granted by the Supreme Court,  and on March 21, 2000, the Supreme
Court  ruled  5-4  that  the FDA did not  have  authority  to  regulate  tobacco
products.

     In response to the Supreme  Court  ruling,  legislation  has recently  been
introduced in Congress that would grant authority to the FDA to regulate tobacco
products.  One cigarette manufacturer expressed interest in such legislation but
the  remaining  companies  have stated  their  opposition.  It is unlikely  that
legislation  giving the FDA  authority to regulate  tobacco  products  will pass
during the year 2001, but the prospects for similar legislation in the future is
uncertain.

     In June 1997, a so called "national settlement" of many of these issues was
proposed 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 national
settlement required  implementation by federal  legislation,  however,  and such
legislation  was  considered but not passed by the Congress in 1998.

     In light of the failure of the national settlement legislation, in November
1998, 46 states,  five  territories and the District of Columbia  entered into a
settlement of  approximately  $250 billion with four major tobacco  companies to
resolve  litigation  over  smoking-related  costs  incurred  by  state  Medicaid
programs. The settlement - which takes effect in each settling jurisdiction when
the  courts in each  such  jurisdiction  enter a final  consent  decree  and any
appeals  of such  decree  are  disposed  of or become  time-barred  - allows for
payment of the agreed sum by the cigarette  manufacturers over 25 years, settles
the state and  territory  health-care  claims  against the tobacco  industry and
imposes a number of new marketing,  advertising, sales and other restrictions on
tobacco products.

     Included  in the  terms  of the  settlement  are  conditions  that  tobacco
companies  participating  in  the  settlement  may  not:  target  youth  in  the
advertising,  promotion or marketing of tobacco  products  (including the use of
cartoons  in such  promotion);  use  tobacco  brand  names to sponsor  concerts,
athletics  events  or other  events  in which a  significant  percentage  of the
audience  is under 18 years of age;  advertise  products in  conspicuous  places
outdoors  (such as  billboards)  or on transit  vehicles;  merchandise a tobacco
brand  name  through  the  marketing,  distribution  or sale of apparel or other
merchandise;  provide  free  samples of tobacco  products  in any area except an
adults-only  facility;  distribute or sell cigarettes in pack sizes of less than
20; or lobby state  legislatures on certain  anti-tobacco  initiatives  (such as
limitations on youth access to vending  machines).  These provisions took effect
by April 23, 1999.
                                      -6-
<PAGE>

     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.  With a limited
number of exceptions,  the state Medicaid  litigation  settlement  prohibits the
participating tobacco manufacturers from challenging any restriction relating to
tobacco  control  enacted  prior to June 1,  1998.  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.

     On September 22, 1999,  the U.S.  Department of Justice filed "an action to
recover health care costs paid for and furnished...by the federal government for
lung cancer, heart disease, emphysema and other tobacco-related illnesses caused
by the fraudulent and tortious  conduct of..." the major tobacco  manufacturers.
The defendant companies  announced that they would fight the litigation,  and on
December 27, 1999 moved to dismiss the government's  complaint. On September 28,
2000, the U.S. District Court for the District of Columbia dismissed some of the
government's claims but allowed the case to precede on two "civil RICO" grounds,
on which all parties have filed  procedural  motions that the court continues to
review.  If  the  Justice  Department  prevails  in  the  litigation,  or if the
litigation is settled,  there can be no assurance that the  litigation  will not
result  in  increased  cigarette  prices  and/or  a  material  reduction  of the
consumption of tobacco products in the United States;  such circumstances  could
have a material adverse affect on the Company's business and financial position.

     In  addition,  proposals  have been  made in  Congress  in recent  years 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, the state Medicaid litigation settlement, nor
recent  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.

     On July 14,  2000,  a Florida  state  court jury  awarded  $145  billion in
punitive damages against the major U.S. tobacco  companies to a class of Florida
smokers who allegedly died or became ill due to cigarette  smoking.  The tobacco
companies  have  moved to set aside the award  and  remove  the case to  federal
court. On November 3, 2000,  U.S.  District Judge Ursula Ungaro - Benages of the
Southern  District of Florida denied the defendants motion to remove the case to
federal  court.  The $145  billion  judgment was returned to the state court for
further  proceedings.  On November 6, 2000,  the Florida  state court denied the
defendants'  motion to set aside the  punitive  damage  award and  rejected  the
tobacco companies  request for a new trial. The tobacco  companies  appealed the
judgment. The appeal is pending in the Third District Court of Appeals, 11th and
16th  Circuits,  in Miami,  Florida.

     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  effect  on its  business  and
financial condition.
                                      -7-
<PAGE>

LEGAL MATTERS

     As previously  mentioned,  in November  1999,  the Company was named in two
separate  law  suits  filed  in  State  Court in New  Mexico  by two  individual
plaintiffs.   The  other   defendants   include  the  principal   U.S.   tobacco
manufacturers,  as well as other distributors.  The complaints seek compensatory
and  punitive  damages  or  injuries  allegedly  caused  by the  use of  tobacco
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.





                                     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,  2000 have been
derived  from the  Company's  audited  consolidated  financial  statements.  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)

                                           ----------------------------------------------------------------
                                               1996         1997         1998         1999           2000
                                           ----------   ----------    ----------   ----------    ----------
<S>                                            <C>          <C>            <C>         <C>           <C>

Statement of Income Data:

     Net sales (a).......................  $2,175,367   $2,395,867    $2,476,376   $2,838,107    $3,035,379
     Costs of goods sold (b).............   2,017,654    2,216,162     2,295,659    2,643,069     2,840,334
                                           ----------   ----------    ----------   ----------    ----------
     Gross profit (b)....................     157,713      179,705       180,717      195,038       195,045
     Operating and administrative
         expenses........................     130,493      148,902       150,977      155,128       160,143
                                           ----------   ----------    ----------   ----------    ----------
     Operating income (b)................      27,220       30,803        29,740       39,910        34,902
     Interest expense, net...............       9,916       18,181        15,402       12,696        12,852
     Amortization of debt
            refinancing costs (c)........       1,319        1,498         2,204        1,274         1,274
                                           ----------   ----------    ----------   ----------    ----------
     Income before income taxes
         and extraordinary item..........      15,985       11,124        12,134       25,940        20,776
     Income tax expense (d)..............       6,941        4,834         4,925        5,740         9,721
                                           ----------   ----------    ----------   ----------    ----------
     Income before extraordinary item....       9,044        6,290         7,209       20,200        11,055
     Extraordinary item, net of tax (e)..      (1,830)          --            --           --            --
                                           ----------   ----------    ----------   ----------    ----------
     Net income (b)......................  $    7,214   $    6,290    $    7,209   $   20,200    $   11,055
                                           ==========   ==========    ==========   ==========    ==========

Other Data:

     EBITDAL (f).........................  $   35,169   $   41,597    $   56,419   $   53,493    $   50,129
     Cash provided by (used in):
         Operating activities............      26,621       17,547         5,933       40,781        (1,925)
         Investing activities............      (6,079)     (30,739)       (5,311)      (6,575)       (7,620)
         Financing activities............     (18,972)       3,549         9,533      (42,789)       21,282
     Depreciation and amortization (g)...       6,573        7,528         8,065        7,912         8,911
     LIFO expense (b)....................       1,376        3,266        18,614        5,671         6,316
     Capital expenditures................       6,079        9,378         5,311        6,575         7,620
</TABLE>

<TABLE>
<CAPTION>


                                                                 As of December 31,
                                                                   (in thousands)
                                           ---------------------------------------------------------------
                                               1996         1997         1998         1999           2000
                                           ----------   ----------    ----------   ----------   ----------
<S>                                             <C>           <C>           <C>         <C>          <C>

Balance Sheet Data:

     Total assets.......................   $  329,036   $  336,580    $  359,390   $  350,068    $ 374,876
     Total debt, including current
         maturities.....................      193,463      197,012       208,124      165,335      186,617
</TABLE>








    See Notes to Selected Historical Consolidated Financial and Other Data.
                                      -9-
<PAGE>

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

(a)  In  February  1997,  the  Company  completed  an  acquisition  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  periods of rising  prices,  the LIFO method of costing  inventories
     generally  results in higher costs being charged against income compared to
     the FIFO  method  ("LIFO  expense")  while  lower  costs  are  retained  in
     inventories.  Conversely,  during periods of declining prices or a decrease
     of  the  Company's  inventory  quantities,   the  LIFO  method  of  costing
     inventories  generally  results in lower costs being charged against income
     compared to the FIFO method ("LIFO income"). During the year ended December
     31, 1998, the Company  recognized LIFO expense of $18.6 million,  primarily
     due to several  increases in domestic  cigarette  wholesale  prices  during
     1998.  However,  the LIFO  expense in 1998 was more than  offset by profits
     resulting  from such price  increases.  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)  Amortization  of debt  refinancing  costs reflects the  amortization of all
     costs associated with issuing, restructuring and refinancing debt.

(d)  Prior to 1999,  the  Company had a  significant  valuation  allowance  that
     reduced certain  deferred tax assets,  based upon  management's  assessment
     that it was more likely than not that these  deferred  tax assets would not
     be realized. However, as a result of the Company's strong earnings history,
     in 1999  management  concluded  that the tax  benefits  related  to  future
     deductions,  including net operating loss  carryforwards,  were more likely
     than not to be realized.  Therefore,  in 1999, the Company  recorded a $6.2
     million decrease in its valuation  allowance,  which resulted in a one-time
     reduction of its tax rate of approximately 24%.

(e)  In connection with the August 7, 1996  Recapitalization,  the Company fully
     repaid the outstanding  debt under a previously  existing credit  facility.
     The early extinguishment of this 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.

(f)  EBITDAL represents operating income before  depreciation,  amortization and
     LIFO expense,  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.

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

                                      -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, 2000,  approximately 72%, 19% and 9%
of the  Company's  net sales were derived  from  cigarettes,  food  products and
non-food products, respectively.

     See Item 3. "Legal  Proceedings - Regulatory and  Legislative  Matters" and
"Impact of Tobacco  Taxes" for  information  on the current  business  and legal
environment in the tobacco industry.

     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.

     During the most recent five-year period,  the Company's sales of cigarettes
were (in thousands):

<TABLE>
<CAPTION>

      FOR THE YEAR ENDED
          DECEMBER 31,                               NET SALES       CARTONS
          ------------                               ---------       -------
<S>           <C>                                       <C>            <C>

             1996                                   $1,505,744       90,897
             1997                                    1,603,362       92,368
             1998                                    1,671,860       87,951
             1999                                    1,989,890       78,972
             2000                                    2,174,700       80,468
</TABLE>


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 lines, the LIFO
methodology  generally results in higher expenses being charged 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 1998,  1999 and 2000,  LIFO expense of $18.6
million, $5.7 million and $6.3 million, respectively, is primarily the result of
increases in cigarette prices.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

     NET SALES. Net sales for 2000 were $3,035.4 million,  an increase of $197.3
million or 7.0% over 1999. The increase in net sales was due to higher net sales
in both cigarettes and food and non-food products.

     Net sales of  cigarettes  for 2000 were  $2,174.7  million,  an increase of
$184.8 million or 9.3% over 1999. The Company's  total  cigarette unit sales for
2000 were 80.5 million cartons,  an increase of 1.5 million cartons or 1.9% from
1999.  The increase in net sales dollars of cigarettes  was  principally  due to
increases  in  manufacturers'  list  prices,  which  have been  passed on to the

                                      -11-
<PAGE>

Company's  customers  in the form of higher  prices,  and an  increase in carton
sales.  The  increase  in the  Company's  carton  sales was  attributable  to an
increase  in the U.S. of 1.9  million  cartons or 2.8%,  offset by a decrease in
Canada of 0.4 million cartons or 2.6%. The Company believes the increase in U.S.
carton sales was  attributable  both to  increased  volume with new and existing
customers and a reduction in cigarette  distribution among grey market suppliers
(resellers  of  cigarettes  intended for  international  markets but sold in the
United States) as a result of the passage of California  bill SB702.  This bill,
passed in October  1999 made it illegal to affix state tax stamps to grey market
cigarettes.

     Net sales of food and  non-food  products in 2000 were $860.7  million,  an
increase of $12.5 million or 1.5% over 1999. The increase occurred  primarily in
retail  beverage  sales,  which  increased  $7.1  million  or 8.8% and fast food
non-cigarette  sales, which increased $6.5 million or 5.9%, offset by a decrease
in cigar and non-cigarette tobacco sales of $8.0 million or 5.4%.

     GROSS PROFIT.  Gross profit for 2000 was $195.0 million,  the same as 1999.
The gross  profit  margin  in 2000  decreased  slightly  to 6.4% of net sales as
compared  to 6.9% of net sales in 1999.  The  decline  in overall  gross  profit
margin was primarily due to an increase in the wholesale cost of cigarettes over
the past year. Gross profit margins on cigarettes are  significantly  lower than
the  margins  on food and  non-food  products,  and the much  faster  growth  in
cigarette  revenues caused the overall  reduction in margins.  In addition gross
profit margins on food and non-food products declined slightly.

     The Company recognized LIFO expense of $6.3 million in 2000, as compared to
$5.7 million in 1999.  The majority of the Company's  LIFO expense is the result
of price increases in the domestic cigarette  categories.  In 2000, in the U.S.,
the wholesale price of cigarettes  increased by $3.30 per carton, as compared to
$1.80 per carton in 1999. The impact of LIFO expense on the financial statements
in 2000 and 1999,  which was  primarily  caused by the  increase in the price of
cigarettes, was largely offset by profits resulting from such price increases.

     OPERATING  AND  ADMINISTRATIVE   EXPENSES.   Operating  and  administrative
expenses for 2000 were $160.1 million,  an increase of $5.0 million or 3.2% over
1999. However,  such expenses in 2000 decreased to 5.3% of net sales as compared
to 5.5% for 1999. The decline in operating expenses as a percent of net sales is
the result of the Company continuing to exert tight control over expenses.

     OPERATING  INCOME. As a result of the foregoing  factors,  operating income
for 2000 was $34.9  million,  a decrease  of $5.0  million or 12.5%  compared to
1999.  As a  percentage  of net sales,  operating  income for 2000 was 1.1%,  as
compared to 1.4% in 1999.

     NET INTEREST EXPENSE.  Net interest expense for 2000 was $12.9 million,  an
increase of $0.2  million or 1.2% from 1999.  This was the result of an increase
in market rates, offset by a decrease in the Company's average debt levels.

     INCOME TAXES.  The tax rate on income increased to 46.8% in 2000 from 22.1%
in 1999.  The increase in 2000 was primarily due to a lower than normal tax rate
on income in 1999. In fiscal 1999 the low tax rate was primarily attributable to
a $6.2  million  reduction  in the  Company's  income  tax  valuation  allowance
recorded during the year due to changes in factors  affecting the  realizability
of the  Company's  deferred  tax  assets.  Prior  to  1999,  the  Company  had a
significant  valuation allowance that reduced certain deferred tax assets, based
upon  management's  assessment  that it was more  likely  than  not  that  these
deferred tax assets would not be realized. However, as a result of the Company's
strong  earnings  history,  in 1999  management  concluded that the tax benefits
related to future deductions,  including net operating loss carryforwards,  were
more likely than not to be realized.  Therefore, in 1999, the Company recorded a
$6.2 million decrease in its valuation  allowance,  which resulted in a one-time
reduction of its tax rate of approximately 24%.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

     NET SALES. Net sales for 1999 were $2,838.1 million,  an increase of $361.7
million  or 14.6%  over 1998.  The  increase  in net sales was due to higher net
sales in both cigarettes and food and non-food products.

     Net sales of  cigarettes  for 1999 were  $1,989.9  million,  an increase of
$318.0 million or 19.0% over 1998. The Company's  total cigarette unit sales for
1999 were 79.0 million cartons,  a decrease of 9.0 million cartons or 10.2% from
1998.  The increase in net sales dollars of cigarettes  was  principally  due to
increases in manufacturers' list prices as well as the $5.00 per carton increase
in California state excise taxes which became effective  January 1, 1999, all of
which were passed along to the Company's customers in the form of higher prices.

                                      -12-
<PAGE>

The decrease in carton sales  occurred both in the U.S.,  which  declined by 8.7
million  cartons or 11.7% and Canada,  which declined by 0.3 million  cartons or
2.4%. In the U.S. the decrease in carton sales occurred primarily in California,
which declined by 8.3 million  cartons or 21.3%.  Outside of California,  carton
sales decreased 1.0%. In addition to increased price competition, the California
market,  which is  generally  the most  price  competitive  market  in which the
Company  operates,  has been  significantly  affected  by  sales  of  cigarettes
originally  intended for export,  but which are  reintroduced  into the domestic
market  (known in the  industry as "grey  market"  cigarettes).  Although  "grey
market" cigarettes are produced by the major tobacco  companies,  the product is
intended for export only, and  traditional  wholesalers,  like the Company,  are
prohibited  from acquiring and selling these products by the  manufacturers  who
produce them. These "grey market"  cigarettes sell for  substantially  less than
cigarettes  intended for domestic  sale, and the Company has lost volume because
of these products.  However, in October 1999, the California  Legislature passed
and the governor  signed,  bill SB702,  which made it illegal to affix state tax
stamps to grey market cigarettes.

     Net sales of food and  non-food  products in 1999 were $848.2  million,  an
increase of $43.7 million or 5.4% over 1998. The increase occurred  primarily in
grocery sales,  which increased $10.3 million or 12.8%,  fast food sales,  which
increased $9.7 million or 9.6%, and general  merchandise  sales, which increased
$7.8 million or 11.8%.

     GROSS  PROFIT.  Gross  profit for 1999 was $195.0  million,  an increase of
$14.3 million or 7.9% over 1998.  The increase in gross profit was due primarily
to sales increases in the cigarette and food and non-food categories.  The gross
profit  margin in 1999  decreased  slightly  to 6.9% of net sales as compared to
7.3% of net sales in 1998.  The  decline  in  overall  gross  profit  margin was
primarily due to a sharp increase in the wholesale  cost of cigarettes  over the
past year. Gross profit margins on cigarettes are  significantly  lower than the
margins on food and non-food  products,  and the much faster growth in cigarette
revenues caused the overall reduction in margins.

     The Company recognized LIFO expense of $5.7 million in 1999, as compared to
$18.6 million in 1998.  The majority of the Company's LIFO expense is the result
of price increases in the domestic cigarette  categories.  In 1999, in the U.S.,
the wholesale price of cigarettes  increased by $1.80 per carton, as compared to
$6.35 per carton in 1998. The impact of LIFO expense on the financial statements
in 1999 and 1998,  which was  primarily  caused by the  increase in the price of
cigarettes,  was  essentially  offset  by  profits  resulting  from  such  price
increases.

     OPERATING  AND  ADMINISTRATIVE   EXPENSES.   Operating  and  administrative
expenses for 1999 were $155.1 million,  an increase of $4.2 million or 2.7% over
1998. However,  such expenses in 1999 decreased to 5.5% of net sales as compared
to 6.1% for 1998. The decline in operating expenses as a percent of net sales is
primarily  due to the  higher  level  of  cigarette  net  sales  resulting  from
cigarette price increases.

     OPERATING  INCOME. As a result of the foregoing  factors,  operating income
for 1999 was $39.9  million,  an increase of $10.2 million or 34.2%  compared to
1998.  As a  percentage  of net sales,  operating  income for 1999 was 1.4%,  as
compared to 1.2% in 1998.

     NET INTEREST  EXPENSE.  Net interest expense for 1999 was $12.7 million,  a
decrease of $2.7 million or 17.6% from 1998.  The net decrease  resulted  from a
decrease  in the  Company's  average  debt  levels and a decline in the  average
borrowing rates primarily as a result of the accounts receivables securitization
which was effective April 1, 1998 and is described below (see "Indebtedness").

     AMORTIZATION OF DEBT REFINANCING  COSTS.  Debt refinancing  costs were $1.3
million for 1999, a decrease of $0.9 million or 42.2% from 1998.  This  decrease
resulted  primarily from the 1998  write-off of a portion of  unamortized  costs
relating to the  modification of the Revolving  Credit Facility which took place
in April 1998 (see "Indebtedness").

     INCOME TAXES.  The tax rate on income  declined from 40.6% in 1998 to 22.1%
in fiscal 1999. The decline in fiscal 1999 was primarily  attributable to a $6.2
million  reduction in the  Company's  income tax  valuation  allowance  recorded
during the year due to changes in factors  affecting  the  realizability  of the
Company's  deferred  tax assets.  Prior to 1999,  the Company had a  significant
valuation  allowance  that  reduced  certain  deferred  tax  assets,  based upon
management's assessment that it was more likely than not that these deferred tax
assets  would not be  realized.  However,  as a result of the  Company's  strong
earnings  history,  management  has concluded  that the tax benefits  related to
future  deductions,  including net operating  loss  carryforwards,  are now more
likely than not to be realized.  Therefore, in 1999, the Company recorded a $6.2
million  decrease  in its  valuation  allowance,  which  resulted  in a one-time
reduction of its tax rate of approximately 24%.

                                      -13-
<PAGE>

INDEBTEDNESS

     On April 1, 1998, the Company  entered into a transaction to securitize its
U.S. trade accounts receivable portfolio ("Accounts  Receivable  Facility").  In
connection  with this  transaction,  the Company formed a  wholly-owned  special
purpose  bankruptcy-remote  subsidiary (the "Special Purpose Company" or "SPC"),
to which the U.S. trade accounts  receivable  originated by the Company are sold
or contributed,  without recourse, pursuant to a receivables sale agreement. The
receivables have been assigned, with a call option by the SPC, to a trust formed
pursuant to a pooling agreement. On April 1, 1998, the SPC issued two classes of
term certificates with an aggregate principal value of $55 million, and variable
certificates of up to $30 million representing fractional undivided interests in
the receivables and the proceeds thereof.

     On a daily basis,  collections related to sold receivables are administered
by the Company acting as servicer,  pursuant to a servicing agreement.  Pursuant
to supplements to the pooling agreement,  certificate  holders' accrued interest
expense and other securitization expenses are reserved out of daily collections,
before such remaining  collections are returned to the Company by the SPC to pay
for the SPC's purchase of newly  originated  receivables  from the Company.  The
revolving period of the securitization expires in January 2003, or earlier if an
early  amortization  event,  as defined in the pooling  agreement,  occurs.  The
interest rate on the fixed term certificates is 0.28% (Class A) and 0.65% (Class
B) above the  Eurodollar  Rate,  which was 6.56% as of December  31,  2000.  The
interest rate on the variable  certificates is 0.25% above the commercial  paper
rate (as defined in the securitization agreement), which was 6.5% as of December
31, 2000.

     In connection with the securitization of accounts  receivable,  the Company
amended its  Revolving  Credit  Facility.  The  amendment  reduced the available
credit  facility from $175 million to $120 million,  reduced its interest  rates
from  1.5% to 1.0%  above  the  Prime  Rate,  and from  2.5% to 2.0%  above  the
Eurodollar Rate, as defined in the amendment,  and extended the maturity through
April,  2003.  As a result  of this  modification,  the  Company  wrote off $0.9
million of  unamortized  refinancing  costs  relating  to the  Revolving  Credit
Facility  in the  second  quarter  of 1998.  Based on  certain  criteria  in the
Revolving  Credit  Facility,  the Company  further  reduced its  interest  rates
effective  October  1, 1998 to 0.75%  above the Prime  Rate and 1.75%  above the
Eurodollar  Rate and again  effective  March 16, 1999,  to 0.25% above the Prime
Rate,  and 1.25%  above the  Eurodollar  Rate,  which are the rates in effect at
December 31, 2000. The bank's Prime Rate and Eurodollar Rate was 9.5% and 6.56%,
respectively, at December 31, 2000.

     The net  result  of the (i)  securitization  of the  Company's  U.S.  trade
accounts receivable  portfolio and (ii) the modification of the Revolving Credit
Facility  was to lower the  Company's  cost of  borrowings,  and to increase its
variable-rate  borrowing capacity from $175 million to $205 million. The Company
incurred  approximately  $1.6  million for legal,  professional  and other costs
related to the transactions  described  above.  These costs were capitalized and
classified  as  other  assets  and are  being  amortized  over the term of these
agreements.

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 its credit facilities. The Company has no mandatory
reductions  of  principal  on  its  Revolving  Credit  Facility,   its  Accounts
Receivable  Facility or its $75 million Senior Subordinated Notes prior to their
final maturities in 2003. The Company has  historically  financed its operations
through internally generated funds and borrowings under its credit facilities.

     In November 1998,  the four largest U.S.  cigarette  manufacturers  and the
state  attorneys  general  of  almost  all  of the  fifty  states,  agreed  to a
multi-billion  dollar  settlement  over public health costs connected to smoking
(See Item 3. "Legal  Proceedings - Regulatory and  Legislative  Matters").  As a
direct  result  of this  settlement,  the  cigarette  manufacturers  raised  the
wholesale price of cigarettes by $4.50 per carton,  effective November 24, 1998,
in order to cover initial costs of the settlement, bringing the total per-carton
price  increase in the U.S. in 1998 to $6.35.  In addition,  the U.S.  cigarette
manufacturers  have raised the wholesale price of cigarettes by $1.80 per carton
in 1999 and  $3.30  per  carton  in 2000.  These  manufacturer  price  increases
resulted in an increase in  inventories  and trade  accounts  receivable for the
Company,  and  correspondingly  higher  debt and  interest  levels.  The Company
believes that it will be able to adequately  finance the corresponding  increase
in working  capital  requirements  relating to its existing  business  under its
current credit facilities.  At current levels of business activity,  the Company
has substantial  excess borrowing  capacity under its current credit facilities.

                                      -14-
<PAGE>

However, if manufacturers' price increases or federal excise tax increases (over
and above  currently  enacted  increases)  continue to sharply  escalate,  or if
payment terms for state and provincial taxes were adversely changed (see "Impact
of Tobacco Taxes"),  the Company might be required to seek additional  financing
in order to meet such higher working capital requirements.

     The Company believes that price and tax increases of the magnitude recently
experienced,  as well as  increases  which occur in the future  (see  "Impact of
Tobacco Taxes"),  will have a negative impact on overall industry unit sales and
will negatively affect the Company's sales of tobacco products. The Company does
not believe that it is able to quantify  the impact of these  higher  prices and
taxes on future sales of cigarettes and other tobacco products.

     The Company's debt obligations totaled $186.6 million at December 31, 2000,
an increase of $21.3 million or 12.9% from $165.3  million at December 31, 1999.
As of December 31,  2000,  the amount  outstanding  under the  Revolving  Credit
Facility was $26.6  million;  an  additional  $81.3  million,  after taking into
account the borrowing base, was available to be drawn.  In addition,  the amount
outstanding  under the  Accounts  Receivable  Facility  was $85.0  million as of
December 31, 2000. The net increase in  outstanding  debt is due primarily to an
increase in working  capital  funding  requirements,  and to a lesser extent,  a
decrease  in  net  cash  provided  from  operating   activities  in  2000.  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  credit  facilities.  In 2000,  net cash  used in
operating activities was $1.9 million as compared net cash provided by operating
activities  of $40.8  million in 1999.  The decrease in  operating  cash flow in
2000, as compared to 1999,  was primarily the result of increases in net working
capital  requirements,  and to a lesser extent, lower earnings in 2000. In 2000,
inventory  and accounts  receivable  increased  primarily due to the increase in
U.S. wholesale  cigarette prices. In 1999, the Company realized higher cigarette
taxes payable principally from a $5.00 per carton increase in cigarette taxes in
California on January 1, 1999. In 1998, accounts receivable and inventories were
heavily  impacted by  significant  changes in the wholesale  price of cigarettes
during the year.

     The Company made capital expenditures of $7.6 million in 2000. In 2001, the
Company  estimates  it  will  spend   approximately  $8.7  million  for  capital
requirements,   principally   consisting  of  warehouse   facilities  and  other
equipment.

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  2000,  such taxes on  cigarettes  represented
approximately  24% of  cigarette  net sales in the U.S.  and 44% 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 and provinces
requiring such a surety (a majority of states in the Company's operating areas).

     The U.S.  federal excise tax on cigarettes is currently $3.40 per carton of
cigarettes,  including a $1.00 per carton increase,  which was effective January
1, 2000.  Legislation  was enacted that will raise the federal  excise tax 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 will
increase the Company's  working capital  requirements by increasing the balances
of its  inventories  and  accounts  receivable.  While the Company is unaware of
additional  legislation  that might further  increase the federal  excise tax on
cigarettes,  there  can be no  assurance  that  similar  proposals  will  not be
considered in the future.

                                      -15-
<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  dollars.  Therefore,
inflation and deflation generally do not have a material impact on the Company's
gross  profit.  As  described  in  "Tobacco   Industry  Business   Environment",
significant increases in manufacturers' prices of cigarettes have occurred,  due
to the  settlement of a number of legal issues facing the industry.  The Company
has been able to pass along to its  customers  all of the price  increases  that
have occurred to date, and, based upon the past experience of the Company, would
expect to pass along any future price or tax increases.

     During  the past  several  years,  low  levels of  overall  inflation  have
resulted in historically low interest rates,  which have benefited the Company's
results of  operations  because of the  Company's  high degree of  leverage.  If
interest  rates  were  to  increase,  as a  result  of  increased  inflation  or
otherwise, the Company could be adversely affected.

NEW ACCOUNTING PRONOUNCEMENTS

     See Note 2 "Summary of  Significant  Accounting  Policies"  included in the
Notes to the Consolidated  Financial Statements contained elsewhere in this Form
10-K.

ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's  major risk exposure is changes in short-term  interest rates
on its domestic variable rate debt.  Depending upon the borrowing option chosen,
the  variable  rate  debt is based  upon  either  the  bank's  Prime  Rate,  the
Eurodollar  Rate, or the Commercial  Paper rate, plus an applicable  margin over
one of these base rates.  If interest rates on existing  variable rate debt rose
66 basis points (which  approximates 10%), the Company's results from operations
and cash flows would not be materially affected.

     The  Company  conducts  business  in  Canada.   However,   changes  in  the
U.S./Canadian exchange rate had no material impact on the overall results of the
Canadian  operation,  as virtually all revenues and expenses of such  operations
are Canadian dollar based.

                                      -16
<PAGE>

ITEM 8.                           FINANCIAL STATEMENTS

                                                                            Page

     Independent Auditors' Report..........................................   18

     Consolidated Balance Sheets as of December 31, 1999 and 2000..........   19

     Consolidated Statements of Income for the years ended December 31,
     1998, 1999 and 2000...................................................   20

     Consolidated Statements of Shareholders' Equity for the years ended
     December 31, 1998, 1999 and 2000......................................   21

     Consolidated Statements of Cash Flows for the years ended December 31,
     1998, 1999 and 2000...................................................   22

     Notes to Consolidated Financial Statements............................   23

                                      -17-
<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, 1999 and
2000, and the related  consolidated  statements of income,  shareholders' equity
and cash flows for each of the three  years in the  period  ended  December  31,
2000. Our audits also included the financial  statement  schedule of the Company
listed in Item 14(a)2.  These  consolidated  financial  statements and financial
statement  schedule are the  responsibility  of the  Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements and financial statement schedule based on our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States of America.  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,  such financial  statements present fairly, in all material
respects,   the  financial  position  of  Core-Mark   International,   Inc.  and
subsidiaries  as of  December  31,  1999  and  2000,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting  principles  generally accepted
in the United States of America.  Also in our opinion,  such financial statement
schedule,  when  considered  in  relation  to the basic  consolidated  financial
statements  taken  as a whole,  present  fairly  in all  material  respects  the
information set forth therein.

                            /S/ Deloitte & Touche LLP

                                      -18-

SAN FRANCISCO, CALIFORNIA
FEBRUARY 22, 2001


<PAGE>

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 2000
                            (IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
                                                                                  1999              2000
                                                                                --------          --------
<S>                                                                                <C>                <C>
ASSETS
------

Current assets:
     Cash .................................................................     $ 17,279           $28,129
     Receivables:
         Trade accounts, less allowance for doubtful
              accounts of $2,320 and $2,660, respectively..................      104,983           109,594
         Other.............................................................       15,287            17,055
     Inventories, net of LIFO allowance of $40,003 and
         $46,319, respectively.............................................      109,139           111,983
     Prepaid expenses and other............................................        5,921             7,694
                                                                                --------           -------

         Total current assets..............................................      252,609           274,455

Property and equipment:
     Equipment.............................................................       57,036            61,816
     Leasehold improvements................................................        9,660            11,138
                                                                                --------           -------

                                                                                  66,696            72,954
     Less accumulated depreciation and amortization........................      (37,277)          (41,888)
                                                                                --------           -------

         Net property and equipment........................................       29,419            31,066

Other assets  .............................................................        5,642             9,588
Goodwill, net of accumulated amortization of
     $21,458 and $23,540, respectively.....................................       62,398            59,767
                                                                                --------           -------

Total assets...............................................................     $350,068          $374,876
                                                                                ========          ========

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

Current liabilities:
     Trade accounts payable................................................     $ 51,093          $ 51,791
     Cigarette and tobacco taxes payable...................................       59,975            52,933
     Income taxes payable..................................................        3,932             3,476
     Deferred income taxes.................................................        4,851             3,759
     Other accrued liabilities.............................................       31,073            31,851
                                                                                --------           -------

         Total current liabilities.........................................      150,924           143,810

Long-term debt.............................................................      165,335           186,617
Other accrued liabilities and deferred income taxes........................        7,859             8,591
                                                                                --------           -------

     Total liabilities.....................................................      324,118           339,018

Commitments and contingencies

Shareholders' equity:
     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
     Retained earnings.....................................................        5,123            16,178
     Accumulated comprehensive loss:
         Cumulative currency translation adjustments.......................       (2,949)           (3,836)
         Additional minimum pension liability..............................       (2,400)           (2,660)
                                                                                --------           -------

     Total shareholders' equity............................................       25,950            35,858
                                                                                --------           -------

     Total liabilities and shareholders' equity............................     $350,068          $374,876
                                                                                ========          ========
</TABLE>
     The accompanying  Notes to Consolidated  Financial  Statements are an
     integral part of these statements.
                                      -19-
<PAGE>

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
                            (IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>

                                                              1998                 1999               2000
                                                           ----------          ----------          ----------
<S>                                                            <C>                 <C>                  <C>

Net sales............................................      $2,476,376          $2,838,107          $3,035,379
Cost of goods sold...................................       2,295,659           2,643,069           2,840,334
                                                           ----------          ----------          ----------

      Gross profit...................................         180,717             195,038             195,045

Operating and administrative expenses................         150,977             155,128             160,143
                                                           ----------          ----------          ----------
      Operating income...............................          29,740              39,910              34,902

Interest expense, net................................          15,402              12,696              12,852
Amortization of debt refinancing costs...............           2,204               1,274               1,274
                                                           ----------          ----------          ----------

      Income before income taxes.....................          12,134              25,940              20,776

Income tax expense...................................           4,925               5,740               9,721
                                                           ----------          ----------          ----------

Net income...........................................      $    7,209          $   20,200          $   11,055
                                                           ==========          ==========          ==========
</TABLE>



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

                                      -20-

<PAGE>

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
                  (IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>

                                                                             RETAINED   ACCUMULATED
                                                               ADDITIONAL    EARNINGS    OTHER           TOTAL
                                                COMMON STOCK     PAID-IN  (ACCUMULATED  COMPREHENSIVE SHAREHOLDERS' COMPREHENSIVE
                                             SHARES    AMOUNT    CAPITAL     DEFICIT)    INCOME (LOSS)   EQUITY       INCOME
                                             ------    ------    -------     --------    -------------   ------       ------
 <S>                                           <C>       <C>        <C>          <C>          <C>         <C>           <C>

Balance, December 31, 1997.................  5,500,000    $55     $26,121     $(22,286)     $(4,926)     $(1,036)

Net income................. ...............         --     --          --        7,209           --        7,209      $ 7,209
Additional minimum pension liability.......         --     --          --           --         (965)        (965)        (965)
Foreign currency translation adjustments ..         --     --          --           --       (1,346)      (1,346)      (1,346)
                                             ---------   ----     -------     --------      -------      -------      -------

Balance, December 31, 1998.................  5,500,000     55      26,121      (15,077)      (7,237)       3,862      $ 4,898
                                                                                                                      =======

Net income.................                         --     --          --       20,200           --       20,200      $20,200
Additional minimum pension liability.......         --     --          --           --          612          612          612
Foreign currency translation adjustments...         --     --          --           --        1,276        1,276        1,276
                                             ---------   ----     -------     --------      -------      -------      -------

Balance, December 31, 1999.................  5,500,000     55      26,121        5,123       (5,349)      25,950      $22,088
                                                                                                                      =======

Net income.................................         --     --          --       11,055           --       11,055      $11,055
Additional minimum pension liability.......         --     --          --           --         (260)        (260)        (260)
Foreign currency translation adjustments...         --     --          --           --         (887)        (887)        (887)
                                             ---------   ----     -------     --------      -------      -------      -------

Balance, December 31, 2000.................  5,500,000    $55     $26,121     $ 16,178      $(6,496)     $35,858      $ 9,908
                                             =========   ====     =======     ========      =======      =======      =======
</TABLE>




























       The accompanying Notes to Consolidated Financial Statements are an
                       integral part of these statements.
                                      -21-

<PAGE>

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
                            (IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>

                                                                                   1998            1999             2000
                                                                                ---------       ---------        ---------
<S>                                                                                 <C>             <C>              <C>

CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:

Net income.............................................................         $   7,209      $   20,200        $  11,055
    Adjustments to reconcile net income to
        net cash provided by (used in) operating activities:
         LIFO expense..................................................            18,614           5,671            6,316
         Amortization of goodwill......................................             2,082           2,083            2,082
         Depreciation and amortization.................................             5,983           5,829            6,829
         Amortization of debt refinancing fees.........................             2,204           1,274            1,274
         Deferred income taxes.........................................            (1,183)         (2,828)            (916)
         Other.........................................................               (71)           (683)           1,170
    Changes in operating assets and liabilities:
         Increase in trade accounts receivable.........................            (7,760)           (260)          (5,537)
         (Increase) decrease in other receivables......................                76          (2,554)          (1,886)
         Increase in inventories.......................................           (29,151)         (1,131)         (10,010)
         (Increase) decrease in prepaid expenses and other.............            (1,236)            319           (8,112)
         Increase (decrease) in trade accounts payable.................            (1,007)          1,554            1,221
         Increase (decrease) in cigarette and tobacco taxes payable....             2,726          13,931           (6,389)
         Increase (decrease) in other accrued
               liabilities and income taxes payable....................             7,447          (2,624)             978
                                                                                ---------       ---------        ---------

Net cash provided by (used in) operating activities....................             5,933          40,781           (1,925)
                                                                                ---------       ---------        ---------

INVESTING ACTIVITIES:

    Additions to property and equipment................................            (5,311)         (6,575)          (7,620)
                                                                                ---------       ---------        ---------
Net cash used in investing activities..................................            (5,311)         (6,575)          (7,620)
                                                                                ---------       ---------        ---------

FINANCING ACTIVITIES:

    Net borrowings (payments) under revolving credit agreement.........           (62,888)        (48,789)          16,282
    Debt refinancing fees..............................................            (1,579)             --               --
    Net proceeds from securitization of trade accounts receivable......            74,000           6,000            5,000
                                                                                ---------       ---------        ---------
    Net cash provided by (used in) financing activities................             9,533         (42,789)          21,282
                                                                                ---------       ---------        ---------

Effects of changes in foreign exchange rates...........................              (850)          1,276             (887)
                                                                                ---------       ---------        ---------

Increase (decrease) in cash............................................             9,305          (7,307)          10,850
Cash, beginning of year................................................            15,281          24,586           17,279
                                                                                ---------       ---------        ---------

CASH, END OF YEAR                                                               $  24,586       $  17,279        $  28,129
                                                                                =========       =========        =========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments during the year for:
      Interest.........................................................         $  15,201       $ 12,451         $ 12,354
      Income taxes.....................................................             4,523          7,305           11,159

</TABLE>



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

                                      -22-
<PAGE>

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000

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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         USE OF ESTIMATES

     These  financial  statements  have been  prepared on the  accrual  basis of
accounting in accordance with accounting  principles  generally  accepted in the
United  States of  America.  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,  results of operations
or cash flows.

         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 are translated at
average rates for the year.  Adjustments  resulting  from such  translation  are
included in cumulative currency  translation  adjustments in other comprehensive
income (loss), a separate component of shareholders' equity.

         EXCISE TAXES

     State and  provincial  excise taxes paid by the Company on cigarettes  were
$466.8 million,  $583.5 million and $597.5 million, for the years ended December
31, 1998, 1999 and 2000, 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  United
States,  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 $24.2  million and $18.6  million at December  31, 1999 and
2000, 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 $18.6 million, $5.7 million and $6.3 million resulted
from using the LIFO method for the years ended December 31, 1998, 1999 and 2000,
respectively.

     Vendor  allowances  and  credits  that relate to the  Company's  buying and
merchandising  activities are recognized as a reduction of cost of goods sold as
earned.

                                      -23-
<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

         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 5 to 15 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,  1998,  1999 and
2000 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,
2000.

         REVENUE RECOGNITION

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

         SHIPPING AND HANDLING CHARGES

     As a wholesale  distributor,  the Company  classifies the costs of shipping
and handling product to its customers as operating and administrative  expenses.
The Company's net sales to its customers  include  markups which are designed to
cover these costs.

         STOCK-BASED COMPENSATION PLAN

     The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for  Stock  Issued to  Employees"  ("APB  25").  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.

         INCOME TAXES

     The  Company  accounts  for  income  taxes  under the  liability  method in
accordance  with  Statement of Financial  Accounting  Standards  (SFAS) No. 109,
"Accounting for Income Taxes", see note 6.

         RECLASSIFICATIONS

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

         NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting  for
Derivative  Instruments and Hedging  Activities," which was amended by SFAS Nos.
137 and 138, issued in June 2000. The  requirements of these  Statements will be
effective  for the  Company in the first  quarter of the fiscal  year  beginning
January 1, 2001. The standard establishes accounting and reporting standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts  and  for  hedging  activities.  Under  the  standard,  certain
contracts  that  were  not  formerly  considered  derivatives  may now  meet the
definition of a derivative.  The Company adopted the standard  effective January
1, 2001. The Company has  determined  that the adoption of SFAS No. 133 will not
have a material impact on the Company's consolidated financial position, results
of operations or cash flows.

                                      -24-
<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

     In December  1999,  the  Securities  and Exchange  Commission  issued Staff
Accounting   Bulletin   (SAB)  No.  101,   "Revenue   Recognition  in  Financial
Statements",   which  provides  the  SEC  staff's  views  on  selected   revenue
recognition  issues.  The  Company  has  determined  that the  adoption  of this
statement  had no  impact  on the  Company's  consolidated  financial  position,
results of operations or cash flows.

     In September 2000, the Financial  Accounting  Standards Board (FASB) issued
SFAS No. 140,  "Accounting  for Transfers and Servicing of Financial  Assets and
Extinguishment  of Liabilities,"  which revises the standards for accounting for
securitizations  and other  transfers of  financial  assets and  collateral  and
requires  entities that have  securitized  financial  assets to provide specific
disclosures.  SFAS No. 140 is effective for transfers and servicing of financial
assets and  extinguishments  of liabilities  occurring after March 31, 2001. The
Company  is  evaluating  the  impact,  if any,  SFAS  No.  140  may  have on its
consolidated financial statements.

3. FINANCING

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

                                                            1999         2000
                                                        ---------     ---------
<S>                                                          <C>           <C>

     Accounts receivable facility..................     $  80,000     $  85,000
     Revolving credit facility.....................        10,335        26,617
     Senior subordinated notes.....................        75,000        75,000

              Long-term debt.......................     $ 165,335     $ 186,617
                                                        =========     =========
</TABLE>


     ACCOUNTS RECEIVABLE FACILITY

     On April 1, 1998, the Company  entered into a transaction to securitize its
U.S. trade accounts receivable portfolio ("Accounts  Receivable  Facility").  In
connection  with this  transaction,  the Company formed a  wholly-owned  special
purpose,  bankruptcy-remote subsidiary (the "Special Purpose Company" or "SPC"),
to which the U.S. trade accounts  receivable  originated by the Company are sold
or contributed,  without recourse, pursuant to a receivables sale agreement. The
receivables have been assigned, with a call option by the SPC, to a trust formed
pursuant to a pooling agreement. On April 1, 1998, the SPC issued two classes of
term certificates with an aggregate principal value of $55 million, and variable
certificates of up to $30 million representing fractional undivided interests in
the receivables and the proceeds thereof.

     On a daily basis,  collections related to sold receivables are administered
by the Company acting as servicer,  pursuant to a servicing agreement.  Pursuant
to supplements to the pooling agreement,  certificate  holders' accrued interest
expense and other securitization expenses are reserved out of daily collections,
before such remaining  collections are returned to the Company by the SPC to pay
for the SPC's purchase of newly  originated  receivables  from the Company.  The
revolving period of the securitization expires in January 2003, or earlier if an
early amortization event, as defined in the pooling agreement, occurs.

     The  interest  rate on the fixed term  certificates  is 0.28% (Class A) and
0.65%  (Class B) above the  Eurodollar  Rate which was 6.56% as of December  31,
2000.  The  interest  rate on the  variable  certificates  is  0.25%  above  the
commercial paper rate (as defined in the  securitization  agreement),  which was
6.50% as of December  31, 2000.  There is a  commitment  fee and facility fee of
0.375%  and  0.1%,  respectively,  on the  total  value  of  available  variable
certificates. As of December 31, 2000, the amount outstanding under the Accounts
Receivable Facility was $85.0 million, which is the limit under this facility.

                                      -25-
<PAGE>

3. FINANCING (CONT.)

     REVOLVING CREDIT FACILITY

     In connection with the securitization of accounts  receivable,  on April 1,
1998, the Company amended its Revolving Credit Facility.  The amendment  reduced
the Revolving  Credit  Facility from $175 million to $120 million,  extended the
maturity from June 30, 2001 through April 1, 2003, and reduced  interest  rates.
The Revolving Credit Facility initially provided for aggregate  borrowings of up
to $210.0  million,  consisting  of: (i) a $35.0  million  term loan,  which was
repaid in 1996,  and (ii) a revolving  credit  facility (the  "Revolving  Credit
Facility")  under which  borrowings  in the amount of up to $175.0  million were
available for working capital and general corporate  purposes.  Borrowings under
this facility remain 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.

     Under the Revolving  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 Revolving 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.

     Under the  Revolving  Credit  Facility the Company has the option to borrow
under: (i) Revolving Credit Loans,  which prior to the amendment,  bore interest
at 1.5% above the bank's Prime Rate; or (ii)  Eurodollar  Loans,  which prior to
the  amendment,  bore  interest at 2.5% above the bank's  Eurodollar  Rate.  The
amendment reduced interest rates to 1.0% above the Prime Rate, and to 2.0% above
the Eurodollar Rate, as defined in the amendment. The Company has the ability to
further  reduce  interest  rates  based on certain  leverage  ratio  criteria as
defined in the  amendment.  Based on this  criteria,  the  Company  reduced  its
interest  rates,  effective  October 1, 1998,  to 0.75% above the Prime Rate and
1.75% above the  Eurodollar  Rate and again  effective  March 16, 1999, to 0.25%
above the Prime Rate and 1.25% above the Eurodollar Rate, which are the rates in
effect at December 31, 2000. The bank's Prime Rate and Eurodollar  Rate was 9.5%
and 6.56%, respectively, at December 31, 2000.

     As of December 31, 2000, the amount  outstanding under the Revolving Credit
Facility was $26.6  million;  an  additional  $81.3  million,  after taking into
account the borrowing base, was available to be drawn. There is a commitment fee
of  0.325%  on  the  unused  portion  of  the  Revolving  Credit  Facility.  The
obligations are secured by all assets of the Company, with the exception of U.S.
trade accounts receivable, which are utilized to support the Accounts Receivable
Facility.

     The  Company  had  letters  of  credit  of $3.2  million  and $3.4  million
outstanding at December 31, 1999 and 2000,  respectively.  The letters of credit
are issued  primarily to secure the Company's bond and insurance  programs.  The
Company  pays fees of 1.25% per annum on the  outstanding  portion of letters of
credit. Prior to the amendment these fees were 2.50% per annum.

     The net  result  of the (i)  securitization  of the  Company's  U.S.  trade
accounts receivable  portfolio and (ii) the modification of the Revolving Credit
Facility  was to lower the  Company's  cost of  borrowings,  and to increase its
variable-rate  borrowing capacity from $175 million to $205 million. The Company
incurred  approximately  $1.6  million for legal,  professional  and other costs
related to the transactions  described  above.  These costs were capitalized and
classified  as  other  assets  and are  being  amortized  over the term of these
facilities.

     In 1996,  the  Company  incurred  approximately  $8.7  million  for  legal,
professional, and other costs related to the original Revolving Credit Facility,
and the Senior  Subordinated Notes described below. These costs were capitalized
and classified as other assets, and were initially  amortized on a straight-line
basis over the term of those  facilities.  As a result of the  amendment  to the
Revolving  Credit Facility  described  above, in 1998 the Company wrote off $0.9
million of costs relating to the original credit facility.

     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. 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,  incurrence  of  indebtedness,   creation  of  liens,
acquisitions and dispositions, investments and dividends.

                                      -26-
<PAGE>

4. 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 2010,  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, 2000 (in thousands):

         2001 ...................................................    $ 13,410
         2002 ...................................................      10,287
         2003 ...................................................       8,057
         2004 ...................................................       6,652
         2005 ...................................................       4,997
         Thereafter..............................................       7,454
                                                                     --------
              Total minimum lease payments.......................      50,857
              Less minimum sublease rental income................        (353)
                                                                     --------
                                                                     $ 50,504
                                                                     ========

     Rental expense for operating  leases was $13.9  million,  $14.4 million and
$15.3  million  for  the  years  ended   December  31,  1998,   1999  and  2000,
respectively.

     CLAIMS AND ASSESSMENTS

     The  Company is a defendant  to two 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 is also a  defendant  to claims  arising in the
ordinary course of business.  Management  believes that the disposition of these
matters will not have a material  adverse  effect on the Company's  consolidated
financial position, results of operations or cash flows.

5. EMPLOYEE BENEFIT PLANS

     PENSION PLAN

     The  Company   sponsors  a  qualified   pension  plan  and  a   non-pension
postretirement  benefit plan for  employees  hired before  September  1986.  The
following tables provide a  reconciliation  of the changes in the plans' benefit
obligations  and fair value of assets over the two-year  period ending  December
31, 2000,  and a statement  of the December 31 funded  status for both years (in
thousands):
<TABLE>
<CAPTION>

                                                           PENSION  BENEFITS          OTHER   BENEFITS
                                                           -----------------          ----------------
                                                           1999         2000         1999          2000
                                                           ----         ----         ----          ----
<S>                                                        <C>          <C>           <C>           <C>

BENEFIT OBLIGATION RECONCILIATION
   January 1 obligation                                 $ 16,250     $ 14,512     $  2,062     $  1,927
   Service cost                                                -            -           26           35
   Interest cost                                           1,093        1,123          140          161
   Participant contributions                                   -            -           63           40
   Actuarial (gain)/loss                                  (1,679)         433         (215)         221
   Benefit payments                                       (1,152)      (1,132)        (149)        (183)
                                                        --------     --------     --------     --------
   December 31 obligation                               $ 14,512     $ 14,936     $  1,927     $  2,201
                                                        ========     ========     ========     ========
</TABLE>
                                      -27-
<PAGE>

5. EMPLOYEE BENEFIT PLANS (CONT.)

FAIR VALUE OF PLAN ASSETS RECONCILIATION
<TABLE>
<CAPTION>
                                                         PENSION  BENEFITS             OTHER  BENEFITS
                                                       -----------------------     -----------------------
                                                          1999          2000         1999           2000
                                                       ---------     ---------     ---------     ---------
<S>                                                        <C>           <C>          <C>            <C>

   January 1 fair value of plan assets                 $  14,869     $  13,730     $       -     $       -
   Actual return (loss) on plan assets                      (130)          864             -             -
   Employer contributions                                    143             -            86           143
   Participant contributions                                   -             -            63            40
   Benefit payments                                       (1,152)       (1,132)         (149)         (183)
                                                       ---------     ---------     ---------     ---------
   December 31 fair value of plan assets               $  13,730     $  13,462     $       -     $       -
                                                       =========     =========     =========     =========
FUNDED STATUS

   December 31 funded status                           $    (782)    $  (1,474)    $  (1,927)    $  (2,201)
   Unrecognized:
     Unamortized prior service cost                            -             -          (151)         (134)
     Actuarial loss                                        2,400         2,833           631           770
                                                       ---------     ---------     ---------     ---------
   Net amount recognized                               $   1,618     $   1,359     $  (1,447)    $  (1,565)
                                                       =========     =========     =========     =========
</TABLE>

The  following   table   provides  the  amounts   recognized  in  the  Company's
consolidated balance sheets as of December 31 (in thousands):
<TABLE>
<CAPTION>
                                                         PENSION  BENEFITS             OTHER  BENEFITS
                                                        ----------------------     -----------------------
                                                          1999          2000         1999           2000
                                                        --------     ---------     ---------     ---------
<S>                                                        <C>           <C>           <C>           <C>

   Accrued benefit liability                            $   (782)    $  (1,474)    $  (1,447)    $  (1,565)
   Additional minimum pension
      liability                                            2,400         2,833             -             -
                                                        --------     ---------     ---------     ---------
   Net amount recognized                                $  1,618     $   1,359     $  (1,447)    $  (1,565)
                                                        ========     =========     =========     =========
</TABLE>

The following  table provides  components of the net periodic  pension and other
benefit cost for fiscal years 1998, 1999 and 2000 (in thousands):
<TABLE>
<CAPTION>
                                                    PENSION  BENEFITS                          OTHER BENEFITS
                                            ----------------------------------      -----------------------------------
                                              1998        1999          2000         1998           1999         2000
                                            --------    --------     ---------      --------     ---------    ---------
<S>                                            <C>          <C>           <C>          <C>           <C>           <C>

Service cost                                $      -    $      -     $       -     $      22    $       26    $      35
Interest cost                                  1,115       1,093         1,123           135           140          161
Expected return on plan assets                (1,047)     (1,078)         (988)            -             -            -
Amortization of:
   Prior service cost                              -           -             -           (17)          (17)         (17)
   Net actuarial loss                            115         141           124            50            58           83
                                            --------    --------     ---------     ---------    ----------    ---------
Net periodic benefit cost                   $    183    $    156     $     259     $     190    $      207    $     262
                                            ========    ========     =========     =========    ==========    =========
</TABLE>

     The amount included within accumulated other comprehensive income (loss) in
the Company's  consolidated  statement of shareholders' equity was $2,660,000 at
December  31, 2000 and  $2,400,000  at December  31,  1999,  which is net of the
effect of income taxes.
                                      -28-
<PAGE>

5. EMPLOYEE BENEFIT PLANS (CONT.)

     The  prior-service  costs are amortized on a  straight-line  basis over the
average  remaining  service period of active  participants.  Gains and losses in
excess of 10% of the greater of the benefit obligation and market-related  value
of assets are  amortized  over the average  remaining  service  period of active
participants.

The assumptions used in the measurement of the Company's benefit obligations are
shown in the following table:
<TABLE>
<CAPTION>

                                                           PENSION BENEFITS             OTHER BENEFITS
                                                       ------------------------     ----------------------
                                                       1998      1999      2000     1998    1999     2000
                                                       ----      ----      ----     ----    ----     ----
<S>                                                     <C>      <C>       <C>      <C>     <C>       <C>

December 31 weighted-average assumptions:
   Discount rate                                       7.00%     8.00%    7.75%    7.00%    8.00%    7.75%
   Expected return on plan assets                      7.50      7.50     7.50      N/A      N/A      N/A
   Rate of compensation increase                        N/A       N/A      N/A      N/A      N/A      N/A
</TABLE>

     For measurement  purposes,  a 10% annual rate of increase in the per capita
cost of covered  health care  benefits was assumed for 1998,  9% for 1999 and 8%
for 2000.  The rate was assumed to decrease  gradually each year to a rate of 6%
for 2002 and remain at that level thereafter.

     Assumed  health  care cost  trend  rates have a  significant  effect on the
amounts  reported  for the  postretirement  health  care  plans.  A 1% change in
assumed health care cost trend rates would have the following  effects  (dollars
in thousands):
<TABLE>
<CAPTION>

                                                                                                1%
                                                                                     -------------------------
                                                                                     Increase         Decrease
                                                                                     -------------------------
<S>                                                                                    <C>              <C>

Effect on total of service and interest cost components of net periodic
   postretirement health care benefit cost                                            $ 27             $(22)
Effect on the health care component of the accumulated postretirement benefit
   obligation                                                                          480             (380)
</TABLE>

SAVINGS PLANS

     The Company  maintains  defined  contribution  plans in the United  States,
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 22%, and
from 1% to 18% of their  compensation  in the U.S. and Canada,  respectively.  A
contribution of up to 6% is considered to be a "basic  contribution"  and in the
U.S. and Canada, respectively 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 $1,133,000,  $1,145,000 and $1,203,000 for 1998,
1999 and 2000, 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.


<PAGE>

A summary  of the  Company's  option  activity  and  related  information  is as
follows:
<TABLE>
<CAPTION>

                                                                               1998        1999        2000
                                                                             -------     -------     -------
<S>                                                                            <C>         <C>          <C>

         Options outstanding, beginning of the year....................      211,000     215,000     239,700
              Granted..................................................       13,000      33,000       8,000
              Exercised................................................           --          --          --
              Forfeitures..............................................       (9,000)     (8,300)     (9,000)
                                                                             -------     -------     -------
         Options outstanding, end of year..............................      215,000     239,700     238,700
                                                                             =======     =======     =======
         Options exercisable at end of year............................           --          --          --
         Options available for grant at end of year....................       85,000      60,300      61,300
</TABLE>

                                      -29-
<PAGE>

5. EMPLOYEE BENEFIT PLANS (CONT.)

     The  weighted-average  exercise price of the Company's  granted options for
each of the years ended December 31, 1998, 1999 and 2000 was $10.00,  $13.18 and
$14.00,  respectively.  The Company's  options  outstanding at December 31, 2000
range in exercise price from $10.00 to $14.00, with a weighted-average  exercise
price of $10.56 and a weighted-average remaining contractual life of 4.4 years.

     Pro forma information regarding net income is required by SFAS 123, and has
been  determined as if the Company had recorded  compensation  cost based on the
fair value of the awards at the grant dates.  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 4.76% for 1998, 6.46% for
1999 and 5.29% for 2000;  volatility of 0.00%;  dividend yield of 0.00%;  and an
expected  life of the  option of 5 years for 1998,  4 years for 1999 and 3 years
for 2000. The weighted-average  estimated fair value per option granted in 1998,
1999 and 2000, was $2.10, $2.96 and $2.35, respectively.  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 1998, 1999 and 2000 would have been  $7,103,000,  $20,074,000 and
$10,928,000, respectively.

6.   INCOME TAXES

     The  Company's  income tax expense  consists of the following for the years
ended December 31 (in thousands):
<TABLE>
<CAPTION>

                                                                                 1998         1999         2000
                                                                              --------     --------     --------
<S>                                                                               <C>          <C>          <C>

         Current:
              Federal..................................................       $  4,594     $  6,313     $  8,380
              State....................................................          1,238        1,804        1,801
              Foreign..................................................            276          451          417
                                                                              --------     --------     --------
                                                                                 6,108        8,568       10,598

         Deferred:
              Federal..................................................           (750)       3,193         (375)
              State....................................................             62           63         (396)
              Foreign..................................................             94          155          155
                                                                              --------     --------     --------
                                                                                  (594)       3,411         (616)

         Decrease in valuation allowance...............................           (589)      (6,239)        (261)
                                                                              --------     --------     --------
         Income tax expense                                                   $  4,925     $  5,740     $  9,721
                                                                              ========     ========     ========
</TABLE>


     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 is as follows for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>

                                                                                 1998         1999         2000
                                                                              --------     --------     --------
<S>                                                                              <C>           <C>           <C>

         Expected federal income tax expense at the statutory rate.....       $  4,247     $  9,079     $  7,272
         Increase (decrease) in taxes resulting from:
              Goodwill amortization....................................            692          692          692
              State income tax expense, net of federal tax benefit.....            844        1,214          913
              Change in valuation allowances...........................           (589)      (6,239)        (261)
         Other, net....................................................           (269)         994        1,105
                                                                              --------     --------     --------
         Income tax expense............................................       $  4,925     $  5,740     $  9,721
                                                                              ========     ========     ========
</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):

                                      -30-
<PAGE>

6.       INCOME TAXES (CONT.)
<TABLE>
<CAPTION>

                                                                                            1999         2000
                                                                                         --------     --------
<S>                                                                                          <C>          <C>

         Deferred tax assets:
              Net operating loss carryforwards......................................     $  6,998     $  6,220
              Employee benefits, including postretirement benefits..................        3,600        3,814
              Other.................................................................        4,114        4,512
                                                                                         --------     --------
                  Total deferred tax assets.........................................       14,712       14,546
              Less valuation allowance..............................................         (914)        (653)
                                                                                         --------     --------
                  Net deferred tax assets...........................................       13,798       13,893
                                                                                         --------     --------

         Deferred tax liabilities:
              Inventories...........................................................        7,790        6,350
              Property & equipment..................................................        3,425        3,898
              Other.................................................................        8,766        8,878
                                                                                         --------     --------
                  Total deferred tax liabilities....................................       19,981       19,126
                                                                                         --------     --------
                  Net deferred tax liabilities......................................     $  6,183     $  5,233
                                                                                         ========     ========
</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.  Prior to 1999,  the Company had a significant  valuation  allowance
that reduced certain  deferred tax assets,  based upon  management's  assessment
that it was more likely  than not that these  deferred  tax assets  would not be
realized.  However,  as a  result  of the  Company's  strong  earnings  history,
management  has  concluded  in 1999  that the tax  benefits  related  to  future
deductions, including net operating loss carryforwards, are more likely than not
to be realized.  At December 31, 2000, the Company had $0.7 million of valuation
allowance remaining on its balance sheet.

     At December 31, 2000, the Company has available for U.S. federal income tax
return  purposes net operating  losses  totaling  approximately  $18.0  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
alternative minimum tax credits totaling $1.1 million,  which have an indefinite
utilization period.

7. 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  and  Accounts
Receivable  Facility,  which are variable rate  instruments,  approximates  fair
market  value.  The rate of  interest,  which is tied to either the bank's Prime
Rate or Eurodollar  Rate or the commercial  paper rate,  fluctuates  with market
conditions.  The fair  value of the  Notes,  calculated  based on quoted  market
prices, was $76,125,000,  $71,250,000 and $71,250,000 at December 31, 1998, 1999
and 2000, respectively.

                                      -31-
<PAGE>

8. SEGMENT INFORMATION

     The Company is a broad-line, full service wholesale distributor of packaged
consumer  products to the convenience  retail industry in western North America,
with revenues  generated from the sale of cigarettes,  tobacco products,  candy,
food, health and beauty aids and general  merchandise.  The Company's  principal
customers include traditional and petroleum convenience stores,  grocery stores,
drug stores,  mass  merchandisers  and liquor stores.  Management has determined
that the only  reportable  segment of the Company is its wholesale  distribution
segment, based on the level at which executive management reviews the results of
operations  in order to make  decisions  regarding  performance  assessment  and
resource  allocation.  Wholesale  distribution segment information as of and for
the years ended December 31 is set forth below (dollars in thousands):

<TABLE>
<CAPTION>

                                                                               1998           1999          2000
                                                                           ----------     ----------     ----------
<S>                                                                            <C>            <C>            <C>

         Net sales from external customers.............................    $2,476,376     $2,838,107     $3,035,379

         Segment depreciation and amortization expense (1).............         5,435          5,647          6,544
         Segment interest  expense.....................................        13,739         12,980         13,816
         Segment pre-tax operating income (2)..........................        18,631         29,195         23,454
         Capital expenditures..........................................         5,311          6,575          7,620

         Segment assets................................................       341,583        338,038        362,593
</TABLE>

         -----------------
          (1)  Represents   depreciation   of  property   and   equipment,   and
               amortization  of  certain  deferred  assets  that are shown as an
               expense in arriving at segment pre-tax operating income.

          (2)  Represents   operating  income,   including   allocated  interest
               expense,   but  excluding   amortization  of  goodwill  and  debt
               refinancing costs, and income taxes.

     A reconciliation of certain of the segment  information  reported above, to
the applicable items in the consolidated financial statements are as follows (in
thousands):


         INCOME BEFORE INCOME TAXES
         --------------------------
<TABLE>
<CAPTION>

                                                                               1998           1999          2000
                                                                           ----------     ----------     ----------
<S>                                                                             <C>           <C>             <C>

               Segment information ....................................    $   18,631     $   29,195     $   23,454
               Less: Goodwill and other unallocated amortization.......         2,630          2,265          2,368
                  Interest expense: unallocated and other..............         1,663           (284)          (964)
                  Amortization of debt refinancing costs...............         2,204          1,274          1,274
                                                                           ----------     ----------     ----------
         Consolidated total............................................    $   12,134     $   25,940     $   20,776
                                                                           ==========     ==========     ==========
</TABLE>


         INTEREST EXPENSE
         ----------------
<TABLE>
<CAPTION>

                                                                               1998           1999          2000
                                                                           ----------     ----------     ----------
<S>                                                                            <C>            <C>            <C>

         Segment information...........................................    $   13,739     $   12,980     $   13,816
         Add: Unallocated and other....................................         1,663           (284)          (964)
                                                                           ----------     ----------     ----------
         Consolidated total............................................    $   15,402     $   12,696     $   12,852
                                                                           ==========     ==========     ==========
</TABLE>


<PAGE>

         DEPRECIATION AND AMORTIZATION
         -----------------------------
<TABLE>
<CAPTION>

                                                                               1998           1999          2000
                                                                           ----------     ----------     ----------
<S>                                                                             <C>           <C>            <C>

         Segment information.....................................          $    5,435     $    5,647     $    6,544
         Add: Unallocated and other..............................                 548            182            285
                                                                           ----------     ----------     ----------
         Consolidated total............................................    $    5,983     $    5,829     $    6,829
                                                                           ==========     ==========     ==========
</TABLE>

         ASSETS
         ------
<TABLE>
<CAPTION>

                                                                                              1999          2000
                                                                                          ----------     ----------
<S>                                                                                           <C>            <C>

         Segment information...........................................                   $  338,038     $  362,593
         Add: Corporate assets.........................................                       12,030         12,283
                                                                                          ----------     ----------
         Consolidated total............................................                   $  350,068     $  374,876
                                                                                          ==========     ==========
</TABLE>

























                                      -32-
<PAGE>

8. SEGMENT INFORMATION (CONT.)

     The Company operates in the United States and Canada.  Foreign and domestic
net sales and  identifiable  assets are as follows as of and for the years ended
December 31, (in thousands):
<TABLE>
<CAPTION>

                                                                                 1998         1999          2000
                                                                             ----------   ----------     ----------
<S>                                                                             <C>           <C>            <C>

  Net Sales:
         United States.................................................      $2,008,813   $2,371,252     $2,565,330
         Canada........................................................         467,563      466,855        470,049
                                                                             ----------   ----------     ----------
         Total.........................................................      $2,476,376   $2,838,107     $3,035,379
                                                                             ==========   ==========     ==========

  Identifiable Assets:
         United States.................................................                   $  294,583     $  323,733
         Canada........................................................                       43,455         38,860
         Corporate.....................................................                       12,030         12,283
                                                                                          ----------     ----------
         Total.........................................................                   $  350,068     $  374,876
                                                                                          ==========     ==========
</TABLE>





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

          None.

                                      -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, 2000):

                  Name       Age                   Position
                  ----       ---                   --------

Gary L. Walsh..............   59 Chairman and Director
Robert A. Allen............   51 President, Chief Executive Officer and Director
Leo F. Korman..............   53 Senior Vice President, Chief Financial Officer
                                 and Secretary
Basil P. Prokop............   57 President, Canada Division
J. Michael Walsh...........   52 Executive Vice President, Sales
Gerald J. Bolduc...........   55  Chief Information Officer, Vice President,
                                  Information Technology

Henry J. Hautau............   58 Vice President, Employee and Corporate Services
Todd L. Stevens............   39 Senior Vice President, Distribution
Thomas A. Berglund.........   40 Director
Terry J. Blumer............   42 Director
John F. Klein..............   37 Director
John A. Sprague............   48 Director

     Gary L. Walsh has been  Chairman and a director of the Company  since 1990.
He served as Chief  Executive  Officer of the Company  from 1990  through  1997.
Effective  January  1,  1998,  Mr.  Walsh  retired  from his  position  as Chief
Executive Officer. Mr. Walsh served as President from 1990 until 1996.

     Robert A.  Allen has been Chief  Executive  Officer  of the  Company  since
January 1998 and President  since  January  1996.  He served as Chief  Operating
Officer of the Company  from January 1996 to December  1997.  Prior to 1996,  he
served as Senior Vice  President,  Distribution  from 1992 through  1995. He has
been a director of the Company since 1994.

     Leo F. Korman has been Senior Vice President and Chief Financial Officer of
the Company 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  Executive  Vice  President,  Sales since October
1999.  He served as Senior Vice  President,  Distribution  from  January 1996 to
September 1999.  Prior thereto,  he served as Senior Vice President,  Operations
since 1992.

     Gerald J. Bolduc has been Chief  Information  Officer of the Company  since
December 1997 and Vice President, Information Technology since May 1985.

     Henry J. Hautau has been Vice President, Employee and Corporate Services of
the Company since May 1992.

     Todd L. Stevens has been Senior Vice President,  Distribution since October
1999. He served as Division  Manager of the Denver  division from August 1996 to
September 1999 and the Spokane division from September 1992 to July 1996.

     Thomas A. Berglund has been a director of the Company since August 1996. He
is a Partner at Jupiter and has been associated with the firm 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 is a
Partner at Jupiter and has been  associated  with the firm since 1995.  Prior to
that, he served for three years as a consultant at Bain & Company,  a management
consulting firm.

     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.

                                      -34-
<PAGE>

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONT.)


     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.

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, 2000, 1999 and 1998.

                           SUMMARY COMPENSATION TABLE

                              ANNUAL COMPENSATION
                              -------------------

                                                        OTHER ANNUAL   ALL OTHER
                               FISCAL  SALARY  BONUS   COMPENSATION COMPENSATION
Name and Principal Position     YEAR    ($)     ($)       ($)(1)    ($)(2)(3)(4)
---------------------------     ----    ---    -----      -----     ------------

Robert A. Allen ..............  2000  $324,000  $145,800                $  7,997
  President and Chief           1999  $311,538  $300,000                $  7,992
  Executive Officer             1998  $298,077  $300,000                $  7,882


J. Michael Walsh .............  2000  $214,785  $ 82,500                $  7,289
  Executive Vice President,     1999  $206,524  $127,500                $  7,135
  Sales                         1998  $198,581  $110,000                $  7,070


Leo F. Korman ................  2000  $223,376  $ 87,500                $  7,344
  Senior Vice President and     1999  $214,785  $145,000                $  7,203
  Chief Financial Officer       1998  $206,524  $140,000                $  7,135

Todd L. Stevens ..............  2000  $185,000  $ 46,666                $  7,096
  Senior Vice President,        1999  $130,384  $ 56,200   $203,455     $  5,031
  Distribution                  1998  $105,769  $ 55,000                $  4,150


Henry J. Hautau ..............  2000  $135,213  $ 41,750                $  6,036
  Vice President, Employee and  1999  $129,922  $ 60,763                $  5,914
  Corporate Services            1998  $126,833  $ 50,157                $  5,671

-----------
(1)  Consists of relocation costs.

(2)  These  figures  for  2000  consist  of the sum  of:  (i)  Company  matching
contributions to the Savings Plan (defined below) in the following amounts:  Mr.
Allen, $5,100; Mr. J.M. Walsh, $5,100; Mr. Korman, $5,100; Mr. Stevens,  $5,100;
and Mr. Hautau,  $4,363; (ii) life and other insurance premiums in the following
amounts:  Mr. Allen,  $2,897; Mr. J.M. Walsh,  $2,189;  Mr. Korman,  $2,244; Mr.
Stevens, $1,996; and Mr. Hautau $1,673.


EXECUTIVE COMPENSATION (CONT.)

(3)  These  figures  for  1999  consist  of the sum  of:  (i)  Company  matching
contributions to the Savings Plan (defined below) in the following amounts:  Mr.
Allen, $4,800; Mr. J.M. Walsh, $4,800; Mr. Korman, $4,800; Mr. Stevens,  $4,069;
and Mr. Hautau,  $4,204; (ii) life and other insurance premiums in the following
amounts:  Mr. Allen,  $3,192; Mr. J.M. Walsh,  $2,335;  Mr. Korman,  $2,403; Mr.
Stevens, $962; and Mr. Hautau $1,710.

                                      -35-
<PAGE>

(4)  These  figures  for  1998  consist  of the sum  of:  (i)  Company  matching
contributions to the Savings Plan (defined below) in the following amounts:  Mr.
Allen, $4,800; Mr. J.M. Walsh, $4,800; Mr. Korman, $4,800; Mr. Stevens,  $3,389;
and Mr. Hautau,  $3,986; (ii) life and other insurance premiums in the following
amounts:  Mr. Allen,  $3,082; Mr. J.M. Walsh,  $2,270;  Mr. Korman,  $2,335; Mr.
Stevens, $761; and Mr. Hautau, $1,685.

STOCK OPTIONS

     During the year ended December 31, 2000 there were no stock options granted
to  the  Company's  chief  executive  officer  or its  four  other  most  highly
compensated executive officers.

     The following table  summarizes  information  with respect to the Company's
chief  executive  officer and its four other most highly  compensated  executive
officers  concerning the exercise of options during 2000 and unexercised options
held on December 31, 2000. The executive  officers  holding  options at December
31, 2000 are Todd L. Stevens and Henry J. Hautau.

     AGGREGATED OPTION EXERCISES IN 2000 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>

                                                                         NUMBER OF SHARES              VALUE OF UNEXERCISED
                                                                      UNDERLYING UNEXERCISED          IN-THE-MONEY OPTIONS
                                                                    OPTIONS AT FISCAL YEAR-END          AT FISCAL YEAR-END
                                                                    --------------------------        ---------------------

                                SHARES ACQUIRED
NAME                            ON EXERCISE (#)   VALUE REALIZED ($)    EXERCISABLE   UNEXERCISABLE  EXERCISABLE($)    UNEXERCISABLE
-----                           ---------------   ------------------    -----------   -------------  --------------    -------------
<S>                                    <C>                <C>               <C>           <C>               <C>              <C>

Todd L Stevens...............          0                 $ 0                 0           29,000         $     0           N/A (1)


Henry J. Hautau..............          0                 $ 0                 0            7,500         $     0           N/A (1)
</TABLE>


(1) Because the Company does not have publicly traded stock this column has been
deemed not applicable.


CERTAIN AGREEMENTS WITH MANAGEMENT

     Each of the following named executive officers; Mr. Robert A. Allen, Mr. J.
Michael  Walsh,  Mr. Leo F. Korman,  and Mr. Basil P. Prokop has entered into an
agreement with the Company which provides that if the employment of such officer
party  thereto is terminated  other than for Cause (as defined  therein) or 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 these 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.

INDEMNIFICATION AGREEMENTS

     Each of the Company's  directors and Mr. Leo F. Korman, the Company's Chief
Financial Officer, and certain other officers of the Company (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.

                                      -36-
<PAGE>

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 22% 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, 2000 is as follows:  Robert
A. Allen,  $38,656; J. Michael Walsh,  $38,539; Leo F. Korman,  $37,913; Todd L.
Stevens, $30,126; and Henry J. Hautau, $28,793.

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 18% 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).

                                      -37-
<PAGE>

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


     The following table sets forth as of December 31, 2000, 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.

                                                Number of
                                                Shares of
                                             Common Stock of       Percentage of
                                                the Company      Total shares of
           Name and Address of                  Beneficially     Common Stockof
           Beneficial Owners(a)                 Owned              the Company
           --------------------                 -----              -----------

 Jupiter.....................................   4,125,000              75.0%
 Robert A. Allen.............................   281,875                  5.1
 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..........................   4,125,000 (b)           75.0
 Terry J. Blumer.............................   4,125,000 (b)           75.0
 John F. Klein...............................   4,125,000 (b)           75.0
 John A. Sprague.............................   4,125,000 (b)           75.0
 All directors and executive officers
     as a group (9 persons) (b)..............   5,341,875              97.1%

-----------

(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.  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,  Blumer, Berglund
and Klein 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. Sprague,  Blumer,
Berglund and Klein  disclaim  beneficial  ownership of all shares of the Company
owned by Jupiter,  except to the extent of their respective  ownership interests
in such partnership.

STOCKHOLDERS AGREEMENT

     On August 7, 1996, the Company  entered into a Stockholders  Agreement (the
"Stockholders   Agreement")   with  Jupiter  and  certain   executive   officers
(individually,  a "Management  Stockholder"  and  collectively,  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,

                                      -38-
<PAGE>

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. Mr. Walsh resigned as chief executive officer,
effective January 1, 1998.

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, 1998, 1999, and 2000 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:

         EXHIBIT
         NUMBER                         EXHIBIT
         ------                         -------

          2.1  Stock Subscription  Agreement,  dated June 17, 1996, by and among
               Jupiter  Partners,  L.P.,  as  amended,  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, incorporated herein
               by reference from Exhibit 2.2 to Core-Mark International,  Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).

        3.1.1  Articles of Incorporation of the Company,  incorporated herein by
               reference  from  Exhibit 3.1 to Core-Mark  International,  Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).

        3.1.2  Restated  Articles of  Incorporation  of the Company dated August
               18, 1998,  incorporated herein by reference from exhibit 3.1.2 of
               Core-Mark  International,  Inc.  Annual Report on Form 10-K filed
               March 19, 1999 (Registration No. 333-14217).

          3.2  Amended By-laws of the Company (filed herewith).

          4.1  Indenture,  dated as of September  27, 1996,  between the Company
               and  Bankers  Trust  Company as Trustee,  incorporated  herein by
               reference  from  Exhibit 4.1 to Core-Mark  International,  Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).

          4.2  Form  of  Face  of  Exchange  Security,  incorporated  herein  by
               reference  from  Exhibit 4.4 to Core-Mark  International,  Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).

         10.1  Manufacturing  Rights Agreement by and among Famous Value Brands,
               Core-Mark  International Inc., Core-Mark Interrelated  Companies,
               Inc. and C/M  Products,  Inc.,  incorporated  herein by reference
               from Exhibit 10.1 to Core-Mark International, Inc.'s Registration
               Statement on Form S-4 (Registration No. 333-14217).

      *10.1.1  Amendment  dated  December 31, 1997 to  Manufacturing  Rights
               Agreement   by  and  among   Famous   Value   Brands,   Core-Mark
               International Inc., Core-Mark  Interrelated  Companies,  Inc. and
               C/M Products, Inc., incorporated herein by reference from exhibit
               10.11 to Core-Mark  International  Inc.'s  Annual  Report on Form
               10-K filed March 20, 1998 (Registration No. 333-14217).

                                      -40-
<PAGE>

         10.2  Manufacturing  Agreement for "Best Buy" Cigarettes by and between
               Famous Value Brands and C/M Products,  Inc.,  incorporated herein
               by reference from Exhibit 10.2 to Core-Mark International, Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).

       *10.2.1 Amendment dated December 31, 1997 to  Manufacturing  Agreement
               for "Best Buy"  Cigarettes by and between Famous Value Brands and
               C/M Products, Inc., incorporated herein by reference from exhibit
               10.12 to Core-Mark  International  Inc.'s  Annual  Report on Form
               10-K filed March 20, 1998 (Registration No. 333-14217).

         10.3  Trademark  License  Agreement by and between  Famous Value Brands
               and Core-Mark Interrelated  Companies,  Inc., incorporated herein
               by reference from Exhibit 10.3 to Core-Mark International, Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).

       10.3.1  Amendment  dated  December  31,  1997  to  Trademark   License
               Agreement  by and  between  Famous  Value  Brands  and  Core-Mark
               Interrelated  Companies,  Inc.,  incorporated herein by reference
               from  exhibit  10.13 to  Core-Mark  International  Inc.'s  Annual
               Report  on Form  10-K  filed  March 20,  1998  (Registration  No.
               333-14217).

         10.4  Stockholders  Agreement  dated as of August 7, 1996, by and among
               the  Company  and  all  of  the  holders  of  its  Common  Stock,
               incorporated  herein by reference  from Exhibit 10.5 to Core-Mark
               International,   Inc.'s   Registration   Statement  on  Form  S-4
               (Registration No. 333-14217).

       10.5.1  Severance and Noncompetition  Agreement,  dated August 7, 1996,
               between the Company  and Gary L.  Walsh,  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).

       10.5.2  Schedule of Severance and Non  Competition  Agreements  omitted
               pursuant  to  Instruction  no. 2 to Item 601 of  Regulation  S-K,
               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).

         10.6  Letter, dated August 7, 1996, from Jupiter Partners LP to Gary L.
               Walsh,  incorporated  herein by  reference  from  Exhibit 10.7 to
               Core-Mark  International,  Inc.'s Registration  Statement on Form
               S-4 (Registration No. 333-14217).

         10.7  Purchase  Agreement,   dated  September  24,  1996,  between  the
               Company,  Chase Securities Inc. and Donaldson,  Lufkin & Jenrette
               Securities  Corporation,  incorporated  herein by reference  from
               Exhibit  10.8 to  Core-Mark  International,  Inc.'s  Registration
               Statement on Form S-4 (Registration No. 333-14217).

       10.8.1  Indemnification Agreement, dated November 12, 1996, between the
               Company and John F. Klein,  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).

       10.8.2  Schedule  of  Indemnification  Agreements  omitted  pursuant to
               Instruction  No. 2 to Item 601 of  Regulation  S-K,  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).

         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  $120,000,000  Amended and Restated  Credit  Agreement dated as of
               April 1, 1998, among Core-Mark  International,  Inc., the Several
               Lenders from time to time Parties Hereto and The Chase  Manhattan
               Bank, as Administrative  Agent,  incorporated herein by reference
               from exhibit  10.14 to  Core-Mark  International  Inc.  Quarterly
               Report on Form 10-Q  filed  August  14,  1998  (Registration  No.
               333-14217).

                                      -41-
<PAGE>

        10.11  Amended  and  Restated  Security  Agreement  dated as of April 1,
               1998, among Core-Mark  International,  Inc., C/M Products,  Inc.,
               Core-Mark   Interrelated    Companies,    Inc.,   and   Core-Mark
               Midcontinent,  Inc.,  in favor of The Chase  Manhattan  Bank,  as
               Administrative  Agent,  incorporated  herein  by  reference  from
               exhibit 10.16 to Core-Mark International Inc. Quarterly Report on
               Form 10-Q filed August 14, 1998 (Registration No. 333-14217).

        10.12  Amendment to Borrower  Stock Pledge  Agreement  dated as of April
               1, 1998,  between  Core-Mark  International,  Inc., and The Chase
               Manhattan Bank, as Administrative  Agent,  incorporated herein by
               reference  from exhibit  10.17 to Core-Mark  International,  Inc.
               Quarterly Report on Form 10-Q filed August 14, 1998 (Registration
               No. 333-14217).

        10.13  Pooling  Agreement,  dated as of April 1, 1998,  among  Core-Mark
               Capital Corporation,  Core-Mark International, Inc., as Servicer,
               and The Chase Manhattan Bank, as Trustee,  incorporated herein by
               reference  from exhibit  10.18 to Core-Mark  International,  Inc.
               Quarterly Report on Form 10-Q filed August 14, 1998 (Registration
               No. 333-14217).

        10.14  Series 1998-1  Supplement to the Pooling  Agreement,  dated as of
               April 1, 1998,  among Core-Mark  Capital  Corporation,  Core-Mark
               International,  Inc., as Servicer,  and The Chase Manhattan Bank,
               incorporated  herein by reference from exhibit 10.19 to Core-Mark
               International,  Inc.  Quarterly  Report on Form 10-Q filed August
               14, 1998 (Registration No. 333-14217).

        10.15  Series 1998-2  Supplement to the Pooling  Agreement,  dated as of
               April 1, 1998,  among Core-Mark  Capital  Corporation,  Core-Mark
               International,  Inc., as Servicer,  and The Chase Manhattan Bank,
               incorporated  herein by reference from exhibit 10.20 to Core-Mark
               International,  Inc.  Quarterly  Report on Form 10-Q filed August
               14, 1998 (Registration No. 333-14217).

        10.16  Servicing  Agreement,  dated as of April 1, 1998, among Core-Mark
               Capital Corporation,  Core-Mark International, Inc., as Servicer,
               Subsidiaries of Core-Mark  International,  Inc., as Subservicers,
               and The Chase  Manhattan Bank,  incorporated  herein by reference
               from exhibit  10.21 to Core-Mark  International,  Inc.  Quarterly
               Report on Form 10-Q  filed  August  14,  1998  (Registration  No.
               333-14217).

        10.17  Receivables  Sale and Contribution  Agreement,  dated as of April
               1,  1998,   among  Core-Mark   Capital   Corporation,   Core-Mark
               International,  Inc., Core-Mark Midcontinent, Inc., and Core-Mark
               Interrelated Companies, Inc., as Sellers,  incorporated herein by
               reference  from exhibit  10.22 to Core-Mark  International,  Inc.
               Quarterly Report on Form 10-Q filed August 14, 1998 (Registration
               No. 333-14217).

           21  List of  Subsidiaries  of the  Company,  incorporated  herein  by
               reference  from  Exhibit 21 to  Core-Mark  International,  Inc.'s
               Registration Statement on Form S-4 (Registration No. 333-14217).

            *  Portions of these exhibits have been omitted pursuant to an Order
               Granting Confidential Treatment Under the Securities Exchange Act
               of 1934 by the  Company  with  the  Commission  pursuant  to Rule
               24b-2, under the Securities Exchange Act of 1934, as amended.

(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 29, 2001.

                          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.

              Signature                      Title                    Date
              ---------                      -----                    ----

         /s/ Gary L. Walsh

      -------------------------
             Gary L. Walsh            Chairman and Director       March 29, 2001


         /s/ Robert A. Allen

      -------------------------
             Robert A. Allen          President, Chief Executive
                                        Officer and Director      March 29, 2001


         /s/ Leo F. Korman

      -------------------------
             Leo F. Korman         Senior Vice President,
                                   Chief Financial Officer and    March 29, 2001
                                   Principal Accounting Officer


         /s/ Thomas A. Berglund

      -------------------------
             Thomas A. Berglund              Director             March 29, 2001


         /s/ Terry J. Blumer

      -------------------------
             Terry J. Blumer                 Director             March 29, 2001


        /s/  John F. Klein

      -------------------------
             John F. Klein                   Director             March 29, 2001


         /s/ John A. Sprague

      -------------------------
             John A. Sprague                 Director             March 29, 2001






                                      -43-
<PAGE>

                                                                     SCHEDULE II

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
              For the Years Ended December 31, 1998, 1999 and 2000
                                 (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,
   1998.........................         $ 2,950     $  810     $    _          $ (999)(a)    $ 2,761
   1999.........................           2,761        308          _            (749)(a)      2,320
   2000.........................           2,320        969          _            (629)(a)      2,660
</TABLE>


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

                                      -44-