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                                  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, 1998

                                       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, 1999, 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, 1999 was 5,500,000
shares.

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                    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 almost $2.5 billion in 1998, is one of 
the largest broad-line, full-service wholesale distributors of packaged 
consumer products to the convenience retail industry in western North 
America. The Company's principal customers include traditional and petroleum 
convenience stores, grocery stores, drug stores, mass merchandisers and 
liquor stores. The Company offers its customers a wide variety of products 
including cigarettes, candy, snacks, fast food, groceries, health and beauty 
care products and other general merchandise.

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

HISTORY

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

INDUSTRY OVERVIEW

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

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       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 management 
information services ("MIS") and other productivity enhancing technology. 
These factors have led to a consolidation of the wholesale distribution 
industry as companies either exit the industry or are acquired by large 
distributors seeking to further leverage their existing operations.

BUSINESS STRATEGY

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

       INCREASE SALES TO EXISTING CUSTOMERS. Because the Company generally 
carries many products that its typical retail store customer purchases from 
other suppliers, a primary element of its growth strategy is to increase 
sales to existing customers. The Company's typical customer purchases its 
products from the Company, from manufacturers who distribute directly to 
retailers, and from a variety of smaller local distributors or jobbers. The 
Company is particularly focused on becoming the retail customer's primary 
supplier. 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-Registered Trademark- (which 
provides state of the art category management for key, high-volume, 
high-impulse convenience retail categories); and (iv) Profit Builder (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 Roadshow, a software program that optimizes the routing of
customer deliveries. The Company intends to continue to pursue cost reductions
by completing the roll-out of some of these and other programs.

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

                                       2
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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 68% of the Company's total net 
sales in 1998.

       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-Registered Trademark-, 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 37,000 stock keeping units (SKU's)), including candy,
snacks, fast food, groceries, non-alcoholic beverages, health and beauty care
products and general merchandise. The Company's strategy is to offer its
convenience retail store customers a variety of food and non-food products at
reasonable prices in flexible quantities.

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

       The Company's grocery products include national brand name items 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. Since 1994, the
Company has targeted the fountain, slush, hot beverage (coffee and hot
chocolate) and frozen food product categories, which present significant growth
opportunities as sales in these product categories are among the fastest growing
product offerings of the convenience store industry.

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

CUSTOMERS

       The Company's current customer base is comprised of a wide range of
retailers, including traditional and petroleum convenience stores, grocery
stores, drug stores, mass-merchandisers and liquor stores. The Company also
provides services to hotel gift shops, military bases, correctional facilities,
college bookstores, movie theaters and video rental stores. In 1998, the
Company's largest customer accounted for 3.6% of net sales, and the Company's
ten largest customers accounted for approximately 27% of net sales. As a result
of its size and geographic coverage, the Company supplies a number of regional
and national chain corporations and, therefore, is able to distribute products
to all or substantially all 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, data exchange, consultative services, 
retail price management systems and UPC control), bar-coded shelf labels to 
assist in effective shelf space management, timely communication of 
manufacturer price change information, seasonal and holiday special 
product/promotional offerings and salesperson assistance in order preparation 
are also important to the retailer in its selection of the Company as its 
supplier.

                                       3

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SUPPLIERS AND MANUFACTURERS

       The Company purchases products for resale to its customers from 
approximately 2,500 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 30%, 13%, 10% and 8% of the Company's net sales in 1998 were 
derived from products purchased by the Company from Philip Morris, R.J. 
Reynolds, Imperial Tobacco and Brown & Williamson, respectively. No other 
supplier's products represented more than 10% of net sales. In addition, 
Philip Morris manufactures the Company's private label Best Buy-Registered 
Trademark- cigarettes. The loss of or a major change in the Company's 
relationships with any of these manufacturers or in any of their structured 
incentive programs could have a material adverse effect on the Company's 
business and financial results.

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

       CIGARETTE PRODUCTS

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

       FOOD PRODUCTS

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

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

       NON-FOOD PRODUCTS

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

DISTRIBUTION

       The Company maintains 19 distribution facilities, of which 15 are located
in the western United States and four are located in western Canada. These
distribution facilities include two consolidating warehouse 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 

                                       4

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years or less. The Company employs a state-of-the-art, computerized truck 
routing system to efficiently construct delivery routes.

COMPETITION

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

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

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

EMPLOYEES

       As of December 31, 1998, the Company had 2,389 employees.

       The Company is a party to local collective bargaining agreements with 
the International Brotherhood of Teamsters covering clerical, warehouse and 
transportation personnel at its facilities in Hayward, California, and 
covering warehouse and transportation personnel in Las Vegas, Nevada. The 
Company is party to a collective bargaining agreement with United Food 
Commercial Workers covering warehouse and transportation personnel in 
Calgary, Alberta. The Company is a party to a collective bargaining agreement 
with Industrial Wood and Allied Workers of Canada covering warehouse 
personnel in Victoria, British Columbia. The agreements covering employees in 
Hayward and Las Vegas expire on January 15, 2000 and March 31, 1999, 
respectively. The agreement covering employees in Calgary expires on August 
31, 2001. The agreement covering employees in Victoria expires on April 5, 
1999. These agreements cover an aggregate of less than 10% of the Company's 
employees.

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

ITEM 2.   PROPERTIES

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

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       The Company's leases expire on various dates between 1999 and 2008, and
in many instances give the Company renewal options. The aggregate rent paid in
connection with the Company's distribution facilities, regional sales offices
and corporate and administrative offices was approximately $6.7 million in 1997
and $7.0 million in 1998. The Company's distribution facilities range from
28,000 to 194,000 square feet and account for approximately 1.7 million square
feet in aggregate. Management believes that the Company's current utilization of
warehouse facilities is approximately 70% to 80% in the aggregate.

ITEM 3.   LEGAL PROCEEDINGS

REGULATORY AND LEGISLATIVE MATTERS

       The tobacco industry is currently subject to significant regulatory 
restrictions, such as the requirement that product packages display warning 
labels, a prohibition on television and radio advertising and prohibitions on 
sales to minors. In August 1996, the United States Food and Drug 
Administration (the "FDA") determined that it had jurisdiction over 
cigarettes and smokeless tobacco products and issued regulations restricting 
the sale, distribution and advertising of cigarette and smokeless tobacco 
products, especially to minors. The 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 petitions for 
rehearing and rehearing en banc were denied and, on January 19, 1999, the FDA 
filed a petition for review by the Supreme Court which is currently pending.

       In November 1998, 46 states, five territories and the District of 
Columbia entered into a settlement with four major tobacco companies to 
resolve litigation over smoking-related costs incurred by state Medicaid 
programs. 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). Many of these 
provisions took effect in November 1998; most of the remaining provisions 
will take effect by April 23, 1999. The Company is unable to assess the 
effects that this agreement will have on the sale of the Company's products; 
there can be no assurance that these new restrictions will not result in a 
material reduction of the consumption of tobacco products in the United 
States and thus will not have a material adverse effect on the Company's 
business and financial position.

       In addition, a number of bills were introduced in Congress during 1997 
and 1998 that would confirm or expand the FDA's jurisdiction, but none were 
enacted. No legislation addressing FDA jurisdiction over tobacco products has 
been introduced in 1999 as of this date, but similar legislation is 
nonetheless possible. In addition, proposals have been made 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.

       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 

                                       6

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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.

       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.

LEGAL MATTERS

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

       As previously reported, in January 1998, the Company was served with a 
summons and First Amended Complaint in an action brought by Operating 
Engineers Local 12 Health and Welfare Trust (on behalf of itself and all 
others similarly situated), now part of a coordinated proceeding pending in 
the Superior Court for San Diego County, against the principal tobacco 
manufacturers, the Company and other distributors and retailers of tobacco 
products. The complaint seeks, inter alia, compensatory and punitive damages, 
restitution for monies expended by the Trust for health care of its members 
who have used tobacco products, and forms of injunctive relief.

       From April 1998 through the date of this filing, the Company was named 
as a defendant in 23 additional similar actions brought by various union 
health and welfare trusts, coordinated into a single proceeding now pending 
in the Superior Court for San Diego County, against major tobacco 
manufacturers as well as other distributors. The complaints seek, inter alia, 
compensatory and punitive damages, restitution for monies expended by the 
trusts for health care of its members who have used tobacco products, and 
forms of injunctive relief.

       As previously reported, in May 1998, a division of the Company was 
named a defendant and served in an individual tobacco litigation complaint 
filed in a state court in Broward County, Florida. The other defendants 
include the principal U.S. tobacco manufacturers as well as other 
distributors/retailers. The case is brought on behalf of two individuals, 
residents of Florida, who have purchased cigarette products distributed by 
the Company, and alleges, among other things, the plaintiffs have suffered 
personal injuries and economic losses from the use of such cigarettes. The 
suit seeks, on behalf of the plaintiffs, compensatory damages and punitive 
damages.

       In November 1998, the Company was served with a summons and complaint 
in an action brought by the Pechanga Band of Luiseno Mission Indians, which 
is now part of the coordinated proceedings involved in the union health and 
welfare trust cases noted above. The complaint seeks, inter alia, 
compensatory and punitive damages, restitution for monies expended by the 
tribe for the health care of its members who have used tobacco products, and 
forms of injunctive relief.

       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.

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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, 1998 
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)
                                          ------------------------------------------------------------------
                                              1994         1995         1996         1997           1998
                                          ------------  -----------   ----------   ----------     ----------
<S>                                      <C>           <C>           <C>          <C>           <C>
STATEMENT OF INCOME DATA:

     Net sales (a).......................  $1,855,356   $2,047,187    $2,175,367   $2,395,867    $2,476,376
     Costs of goods sold (b).............   1,719,999    1,901,604     2,017,654    2,216,162     2,295,659
                                            ---------    ---------     ---------    ---------     ---------
     Gross profit (b)....................     135,357      145,583       157,713      179,705       180,717
     Operating and administrative
         expenses........................     116,080      125,245       130,493      148,902       150,977
                                            ---------    ---------     ---------    ---------     ---------
     Operating income (b)................      19,277       20,338        27,220       30,803        29,740
     Interest expense, net...............       5,773        6,987         9,916       18,181        15,402
     Amortization of debt
            refinancing costs (c)........       1,600        1,065         1,319        1,498         2,204
                                            ---------    ---------     ---------    ---------     ---------
     Income before income taxes
         and extraordinary item..........      11,904       12,286        15,985       11,124        12,134
     Income tax expense..................       2,816        5,563         6,941        4,834         4,925
                                            ---------    ---------     ---------    ---------     ---------
     Income before extraordinary item....       9,088        6,723         9,044        6,290         7,209
     Extraordinary item, net of tax (d)..          --           --        (1,830)          --            --
                                            ---------    ---------     ---------    ---------     ---------
     Net income (b)......................    $  9,088     $  6,723      $  7,214     $  6,290      $  7,209
                                            ---------    ---------      --------     --------      --------
                                            ---------    ---------      --------     --------      --------

OTHER DATA:

     EBITDAL (e).........................    $ 24,271     $ 29,696      $ 35,169     $ 41,597      $ 56,419
     Cash provided by (used in):
         Operating activities............      54,708       12,529        26,621       17,547         5,933
         Investing activities............      (5,974)     (16,896)       (6,079)     (30,739)       (5,311)
         Financing activities............     (43,586)      11,397       (18,972)       3,549         9,533
     Depreciation and amortization (f)...       5,541        5,943         6,573        7,528         8,065
     LIFO expense (income) (b)...........        (547)       3,415         1,376        3,266        18,614
     Capital expenditures................       5,376        7,286         6,079        9,378         5,311

</TABLE>

<TABLE>
<CAPTION>

                                                                 AS OF DECEMBER 31,
                                                                   (IN THOUSANDS)
                                          ------------------------------------------------------------------
                                               1994         1995         1996         1997           1998
                                          ------------   ----------   ----------   ----------     ----------
<S>                                      <C>            <C>          <C>          <C>            <C>
BALANCE SHEET DATA:

     Total assets.......................     $293,743     $324,536      $329,036     $336,580      $359,390
     Total debt, including current
         maturities.....................       84,627      101,598       193,463      197,012       208,124
     Mandatorily redeemable
         preferred stock (g)............       41,767           --            --           --            --

</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 the second quarter of 1995, the Company completed two acquisitions which
     added approximately $62 million in net sales for the year ended December
     31, 1995. In February 1997, the Company completed 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)  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 (see Note 3 in
     the Notes to the Consolidated Financial Statements contained elsewhere in
     this Form 10-K).

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

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

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

                                       10

<PAGE>

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

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

GENERAL

       The Company is one of the largest broad-line, full-service wholesale 
distributors of packaged consumer products to the convenience retail industry 
in western North America. The products distributed by the Company include 
cigarettes, food products such as candy, fast food, snacks, groceries and 
non-alcoholic beverages, and non-food products such as film, batteries and 
other sundries, health and beauty care products and tobacco products other 
than cigarettes. In the year ended December 31, 1998, approximately 68%, 22% 
and 10% of the Company's net sales were derived from cigarettes, food 
products and non-food products, respectively.

TOBACCO INDUSTRY BUSINESS ENVIRONMENT

       Manufacturers and distributors of cigarettes and other tobacco 
products are currently facing a number of significant issues that affect the 
business environment in which they operate including proposed additional 
governmental regulation (see Item 3. "Legal Proceedings - Regulatory and 
Legislative Matters"); actual and proposed excise tax increases (see "Impact 
of Tobacco Taxes"); increased litigation involving health and other effects 
of cigarette smoking and other uses of tobacco (see Item 3. "Legal 
Proceedings - Legal Matters"); and potential litigation by the U.S. 
Department of Justice to recover federal Medicare costs allegedly connected 
to smoking.

       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. Similar federal legislation has not been introduced to 
date in 1999.

       In light of failure of the national settlement legislation, the four 
largest U.S. cigarette manufacturers and the attorneys general of 46 states, 
5 territories, and the District of Columbia agreed to a settlement of 
approximately $400 billion for public health-care costs allegedly connected 
to smoking. The settlement -- which takes effect in each settling 
jurisdiction when the courts in each such jurisdiction enter a final consent 
decree consistent with the settlement (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 (see 
Item 3. "Legal Proceedings - Regulatory and Legislative Matters"). As a 
direct result of this settlement, the major cigarette manufacturers raised 
the wholesale price of cigarettes by $4.50 per carton, effective November 24, 
1998, bringing the total per-carton price increase in the United States in 
1998 to $6.35.

       Effective January 1, 1999, the State of California increased the state 
excise tax on cigarettes by $5.00 per carton. California is the Company's 
largest market, representing approximately 44% of carton sales in 1998.

         The Company believes that price and tax increases of this magnitude 
will have a negative impact on overall industry unit sales. Accordingly, the 
Company believes that these price and tax increases will negatively affect 
the Company's business of distributing tobacco products by decreasing the 
volume of product sales. 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. Manufacturer price increases will also 
increase the Company's debt and interest expense levels. The Company believes 
that it has adequate financing arrangements in place at the present time to 
finance the additional working capital requirements of the most recent 
manufacturer price increases. However, depending upon future levels of 
manufacturer price increases, or if the terms or amounts of state and 
provincial excise taxes were adversely changed, the Company may be required 
to seek additional financing in order to meet such higher working capital 
requirements.

                                       11

<PAGE>

       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>
                       1994                         $1,299,687       80,703
                       1995                          1,446,697       88,933
                       1996                          1,505,744       90,897
                       1997                          1,603,362       92,368
                       1998                          1,671,860       87,951

</TABLE>

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

IMPACT OF LIFO INVENTORY VALUATION METHOD

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

       During periods of price inflation in the Company's product 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 1996 and 1997, LIFO expense of $1.4 million
and $3.3 million, respectively, is primarily the result of increases in
cigarette prices. In 1998, cigarette manufacturers increased prices
significantly, resulting in LIFO expense of $18.6 million for the year.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

       NET SALES. Net sales for 1998 were $2,476.4 million, an increase of $80.5
million or 3.4% over 1997. 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 1998 were $1,671.9 million, an increase of 
$68.5 million or 4.3% over 1997. The Company's total cigarette unit sales for 
1998 were 88.0 million cartons, a decrease of 4.4 million cartons or 4.8% 
from 1997. The increase in net sales dollars of cigarettes was principally 
due to increases in manufacturers' list prices that were passed along to the 
Company's customers. The decrease in carton sales occurred both in the U.S., 
which declined by 3.2 million cartons or 4.2% and Canada, which declined by 
1.2 million cartons or 7.8%. In the U.S. the decrease in carton sales 
occurred primarily in California, and was principally due to increased price 
competition. Outside of California, carton sales increased 6.7%. 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. In August 
1998, the California Legislature passed a law prohibiting the sale and 
distribution of these export cigarettes. However, the Company is unable to 
predict what effect this new legislation will have on the sale of "grey 
market" cigarettes in the state of California. In Canada, the decline in 
cigarette volume is primarily due to the loss of one customer whose purchases 
were heavily oriented toward cigarettes.

                                       12

<PAGE>

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
(CONTINUED)

       Net sales of food and non-food products in 1998 were $804.5 million, an
increase of $12.0 million or 1.5% over 1997. The increase occurred primarily in
grocery sales, which increased $12.5 million or 18.5%, fast food sales, which
increased $9.2 million or 9.9%, and snack sales, which increased $7.1 million or
13.0%. The increases were partially offset by decreases in confection sales of
$21.0 million, or 8.3%, which resulted from the loss of one customer whose
purchases were heavily oriented towards confection products.

       GROSS PROFIT. Gross profit for 1998 was $180.7 million, an increase of
$1.0 million or 0.6% over 1997. Gross profit dollars in the cigarette category
increased over 1997, despite lower volumes, as gross profit dollars per carton
increased over the previous year. Gross profit margins on cigarette sales were
virtually unchanged from 1997.

       Gross profit on food and non-food products declined slightly from 1997,
on a small increase in sales volume of $12 million. The Company experienced a
small decline in gross profit margins on these food and non-food product lines.

       The Company recognized LIFO expense of $18.6 million in 1998, as compared
to $3.3 million in 1997. The great majority of the Company's LIFO expense is the
result of price increases in the domestic cigarette categories. In 1998, the
wholesale price of cigarettes increased by $6.35 per carton, as compared to
$1.20 per carton in 1997. The impact of LIFO expense on the financial
statements, which was caused by the sharp increase in the price of cigarettes,
was more than offset by profits resulting from such price increases.

       OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative
expenses for 1998 were $151.0 million, an increase of $2.1 million or 1.4% over
1997. However, such expenses in 1998 decreased to 6.1% of net sales as compared
to 6.2% for 1997. The higher expenses as a percent of net sales in 1997 reflect
approximately $2.4 million (0.1% of 1997 net sales) of one-time duplicative
facility costs incurred as a result of the Sosnick acquisition (see Note 10 in
the Notes to the Consolidated Financial Statements contained elsewhere in this
Form 10-K).

       OPERATING INCOME. As a result of the foregoing factors, operating income
for 1998 was $29.7 million, a decrease of $1.1 million or 3.5% compared to 1997.
As a percentage of net sales, operating income for 1998 was 1.2%, as compared to
1.3% in 1997.

       NET INTEREST EXPENSE. Net interest expense for 1998 was $15.4 million, a
decrease of $2.8 million or 15.3% from 1997. The net decrease resulted from a
decrease in the Company's borrowing rates as a result of the securitization of
certain receivables described below (see "Asset Securitization") and a decrease
in average debt levels.

       AMORTIZATION OF DEBT REFINANCING COSTS. Debt refinancing costs were 
$2.2 million for 1998, an increase of $0.7 million or 47.1% over 1997. This 
increase resulted primarily from the write off of a portion of unamortized 
costs resulting from the modification of the Revolving Credit Facility (see 
"Asset Securitization").

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

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

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

                                       13

<PAGE>

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
(CONTINUED)

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

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

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

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

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

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

ASSET SECURITIZATION

       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 5.06% as of December 31, 1998. The interest rate on 
the variable certificates is 0.50% above the commercial paper rate (as 
defined in the securitization agreement), which was 4.90% as of December 31, 
1998.

                                       14

<PAGE>

ASSET SECURITIZATION (CONTINUED)

       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, from 1.0% to 0.75% above the Prime 
Rate, and from 2.0% to 1.75% above the Eurodollar Rate, which are the rates 
in effect at December 31, 1998.

       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 transactions.

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 "Tobacco Industry Business Environment"). 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. This manufacturer price increase 
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. However, if manufacturers' price increases or federal 
excise tax increases (over and above currently enacted increases) continued 
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's debt obligations totaled $208.1 million at December 31, 
1998, an increase of $11.1 million or 5.6% from $197.0 million at December 
31, 1997. As of December 31, 1998, the amount outstanding under the Revolving 
Credit Facility was $59.1 million; an additional $32.8 million, after taking 
into account the borrowing base, was available to be drawn. In addition, the 
amount outstanding under the Accounts Receivable Facility was $74.0 million 
as of December 31, 1998. Under this facility, at December 31, 1998, the 
Company had sufficient collateral to issue up to its limit of variable 
certificates, or an additional $11.0 million. The net increase in outstanding 
debt is due primarily to an increase in working capital funding requirements 
resulting principally from increases in trade accounts receivable and 
inventory, primarily a result of increases in cigarette manufacturers' list 
prices that were passed along to the Company's customers. 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 1998, net cash provided by 
operating activities was $5.9 million as compared to $17.6 million in 1997. 
The decrease resulted principally from changes in net working capital. In 
1996, net cash provided by operating activities was $26.6 million. The 
decrease from 1996 to 1997 resulted principally from changes in net working 
capital.

       The Company made capital expenditures of $5.3 million in 1998. In 
1999, the Company estimates it will spend approximately $7.5 million for 
capital requirements, principally consisting of warehouse facilities and 
other equipment.

                                       15

<PAGE>

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 1998, such taxes on cigarettes 
represented approximately 24% of cigarette net sales in the U.S. and 46% 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.

       In November 1998, Proposition 10 was passed in the California general 
election. This proposition, which was effective January 1, 1999, increased 
California state excise taxes on cigarettes by $5.00 per carton, as well as 
increased taxes on cigars 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 $2.40 per 
carton of cigarettes. In August 1997, legislation was enacted that will raise 
the federal excise tax by $1.00 per carton of cigarettes starting in the year 
2000 and by an additional $.50 per carton of cigarettes in 2002. Unlike the 
state and provincial taxes described above, U.S. federal excise taxes on 
cigarettes are paid by the cigarette manufacturers and passed through to the 
Company as a component of the cost of cigarettes. Such increases in U.S. 
federal taxes will increase the Company's working capital requirements by 
increasing the balances of its inventories and accounts receivable. The 
President as well as various members of Congress have suggested additional 
excise taxes on cigarette and tobacco products, either as part of the 
proposed legislative resolution of various issues affecting the U.S. tobacco 
industry discussed above or to finance unrelated federal spending.

IMPACT OF YEAR 2000 COMPLIANCE ISSUES

       In accordance with the safe harbor provisions of the Private 
Securities Act of 1995, the Company notes that certain statements contained 
in the following discussion concerning year 2000 issues are forward-looking 
in nature and are subject to many risks and uncertainties. These 
forward-looking statements include such matters as the Company's projected 
state of readiness, the Company's projected cost of remediation, the expected 
date of completion of each phase and the expected completion date of 
contingency plans. Such statements also constitute "year 2000 readiness 
disclosure" within the meaning of the year 2000 Information and Readiness 
Disclosure Act.

       The Company relies upon various information technology and 
non-information technology systems that the Company is currently in the 
process of assessing and modifying or converting to be year 2000 compliant. 
Year 2000 compliance indicates that computer software, hardware and embedded 
processors are able to correctly process the year 2000 date parameter. The 
systems being assessed for year 2000 compliance include the Company's 
computer programs, certain building infrastructure components (including 
elevators, alarm systems and certain HVAC systems), certain data collection 
and transmission devices and the systems of customers, vendors and other 
constituents with whom the Company has material relationships that could have 
an impact on the Company's operations. Non-compliance could result in a 
disruption of the business, which could have a material impact on the 
Company's results of operations, financial position and/or cash flows.

       The most reasonable and likely result of non-compliance would be the 
Company's inability to utilize its computer systems to process daily 
transactions, which could result in increased operating costs and delayed 
shipments to customers, and as a result, the possible monetary losses from 
canceled future business and lawsuits for breach of contract with these 
customers. The Company is currently in the process of developing contingency 
plans for various business disruptions, which will include procedures to 
mitigate the effect of year 2000 non-compliance issues. The contingency plans 
will include procedures for alternate processing of daily transactions in the 
event of an inability to use the Company's computer systems, as well as 
procedures for transmitting and receiving data from third parties with 
non-compliant systems.

                                       16

<PAGE>

IMPACT OF YEAR 2000 COMPLIANCE ISSUES (CONTINUED)

       The assessment phase of the Company's systems was complete as of 
December 31, 1998. The Company has completed modification or conversion and 
testing of approximately 85% of the Company's systems as of December 31, 
1998. The Company presently believes that the modification or conversion of 
existing systems will be completed in the second quarter of 1999.

       The Company has initiated formal communications with customers, 
vendors and other constituents with whom the Company has material 
relationships, to determine the extent to which the Company is vulnerable to 
those third parties' failure to become year 2000 compliant. The Company 
presently believes that the third party assessment process will be completed 
by June 30, 1999 and was approximately 80% complete as of December 31, 1998. 
However, there can be no assurance that the systems of other companies will 
be modified or converted on time, which could have an adverse effect on the 
Company's operations.

       The Company has utilized and will continue to utilize internal 
resources to modify or convert and test for year 2000 compliance. The 
estimated total cost for the assessment, modification or converting and 
testing of the Company's systems is approximately $1.1 million. These costs 
represent approximately 45% of the fiscal 1998 information technology 
department expenses and are comprised of $0.1 million for assessment and $1.0 
million for software modification or conversion. As a result of the year 2000 
compliance effort, the Company believes that no information technology 
projects have been deferred that will have a material impact on the Company's 
operations. All of the costs related to year 2000 compliance have been 
expensed as incurred, and have been and are expected to be, funded through 
operating cash flows. The Company has incurred approximately $1.0 million of 
costs as of December 31, 1998 which were comprised of $0.1 million for 
assessment and $0.9 million for software modification or conversion.

       The costs associated with year 2000 compliance are based on 
management's estimates, which were derived using numerous assumptions of 
future events, including the cost and continued availability of certain 
resources, and other factors. However, there can be no assurance that these 
estimates will be achieved and actual results could differ materially from 
those anticipated.

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 11 "New Accounting Pronouncements" included in the Notes to 
the Consolidated Financial Statements contained elsewhere in this Form 10-K.

                                       17

<PAGE>

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 54 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.












                                       18

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                                          PAGE
                                                                                                          ----
    <S>                                                                                                  <C>
      Independent Auditors' Report (Deloitte & Touche LLP).............................................    20

      Independent Auditors' Report (KPMG LLP)..........................................................    21

      Consolidated Balance Sheets as of December 31, 1997 and 1998.....................................    22

      Consolidated Statements of Income for the years ended December 31, 1996, 1997 and 1998...........    23

      Consolidated Statements of Shareholders' Equity (Deficit) for the years ended December 31, 1996,
         1997 and 1998.................................................................................    24

      Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998.......    25

      Notes to Consolidated Financial Statements.......................................................    26

</TABLE>

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


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

       We have audited the accompanying consolidated balance sheet of Core-Mark
International, Inc. and subsidiaries (the "Company") as of December 31, 1998,
and the related consolidated statements of income, shareholders' equity
(deficit) and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

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

       In our opinion, such 1998 consolidated financial statements present
fairly, in all material respects, the financial position of Core-Mark
International, Inc. and subsidiaries as of December 31, 1998, and the results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.

                            /s/ Deloitte & Touche LLP


SAN FRANCISCO, CALIFORNIA
FEBRUARY 25, 1999


                                       20
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


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

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

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

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

                                      /s/  KPMG LLP


SAN FRANCISCO, CALIFORNIA
FEBRUARY 20, 1998

                                       21

<PAGE>

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1998
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                                  1997              1998
                                                                                 ------           -------
<S>                                                                            <C>               <C>
ASSETS

Current assets:

     Cash .................................................................     $ 15,281          $ 24,586
     Receivables:
         Trade accounts, less allowance for doubtful
              accounts of $2,950 and $2,761, respectively..................       96,610           103,412
         Other.............................................................       12,806            12,578
     Inventories, net of LIFO allowance of $15,718 and
         $34,332, respectively.............................................      103,246           112,481
     Prepaid expenses and other............................................        5,847             6,576
                                                                                --------          --------
         Total current assets..............................................      233,790           259,633

Property and equipment:
     Equipment.............................................................       47,587            52,032
     Leasehold improvements................................................        9,046             9,300
                                                                                --------          --------
                                                                                  56,633            61,332
     Less accumulated depreciation and amortization........................      (28,633)          (33,283)
                                                                                --------          --------
         Net property and equipment........................................       28,000            28,049
Other assets  .............................................................        8,277             7,227
Goodwill, net of accumulated amortization of
     $17,293 and $19,375, respectively.....................................       66,513            64,481
                                                                                --------          --------
                                                                                $336,580          $359,390
                                                                                --------          --------
                                                                                --------          --------

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
     Trade accounts payable................................................     $ 50,737          $ 48,867
     Cigarette and tobacco taxes payable...................................       43,506            45,073
     Income taxes payable..................................................        1,085             2,698
     Deferred income taxes.................................................        7,599             6,992
     Other accrued liabilities.............................................       28,647            34,514
                                                                                --------          --------
         Total current liabilities.........................................      131,574           138,144

Long-term debt.............................................................      197,012           208,124
Other accrued liabilities and deferred income taxes........................        9,030             9,260
                                                                                --------          --------
     Total liabilities.....................................................      337,616           355,528

Commitments and contingencies

Shareholders' equity (deficit):
     Common stock; $.01 par value; 10,000,000 shares authorized;
         5,500,000 shares issued and outstanding...........................           55                55
     Additional paid-in capital............................................       26,121            26,121
     Accumulated deficit...................................................      (22,286)          (15,077)
     Accumulated comprehensive loss:
         Cumulative currency translation adjustments.......................       (2,879)           (4,225)
         Additional minimum pension liability..............................       (2,047)           (3,012)
                                                                                --------          --------
     Total shareholders' equity (deficit)..................................       (1,036)            3,862
                                                                                --------          --------
                                                                                $336,580          $359,390
                                                                                --------          --------
                                                                                --------          --------
</TABLE>

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

                                       22

<PAGE>

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>

                                                              1996                 1997                 1998 
                                                             ------               ------               ------
<S>                                                      <C>                 <C>                  <C>
Net sales............................................      $2,175,367           $2,395,867           $2,476,376
Cost of goods sold...................................       2,017,654            2,216,162            2,295,659
                                                         ------------         ------------         ------------

      Gross profit...................................         157,713              179,705              180,717

Operating and administrative expenses................         130,493              148,902              150,977
                                                         ------------         ------------         ------------

      Operating income...............................          27,220               30,803               29,740

Interest expense, net................................           9,916               18,181               15,402
Amortization of debt refinancing costs...............           1,319                1,498                2,204
                                                         ------------         ------------         ------------

      Income before income taxes and
         extraordinary item..........................          15,985               11,124               12,134

Income tax expense...................................           6,941                4,834                4,925
                                                         ------------         ------------         ------------

      Income before extraordinary item...............           9,044                6,290                7,209

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

Net income...........................................    $      7,214         $      6,290         $      7,209
                                                         ------------         ------------         ------------
                                                         ------------         ------------         ------------

</TABLE>

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

                                       23

<PAGE>

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
                  (IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>

                                                                                           ACCUMULATED       TOTAL
                                                COMMON STOCK     ADDITIONAL                   OTHER      SHAREHOLDERS'
                                             ------------------   PAID-IN    ACCUMULATED  COMPREHENSIVE     EQUITY    COMPREHENSIVE
                                               SHARES   AMOUNT    CAPITAL      DEFICIT     INCOME (LOSS)   (DEFICIT)      INCOME
                                             ---------  -------  ----------- ------------- -------------  ------------  -----------
<S>                                        <C>         <C>      <C>         <C>           <C>            <C>           <C>
Balance, December 31, 1995................         100    $ --     $128,351    $ (35,790)     $ (4,892)       $ 87,669

Net income................................          --      --           --        7,214            --           7,214     $  7,214
Additional minimum pension liability......          --      --           --           --           587             587          587
Foreign currency translation adjustments..          --      --           --           --          (295)           (295)        (295)
Recapitalization:
  Issuance of new $.01 par value common...          27      --       41,250           --            --          41,250           --
  Repurchase of old $.01 par value
     common...............................         (91)     --     (141,250)          --            --        (141,250)          --
  Stock split:  155,000 for 1.............   5,499,964      55          (55)          --            --              --           --
  Transaction costs.......................          --      --       (2,175)          --            --          (2,175)          --
                                            ----------    ----     --------      -------        -------        -------     --------
Balance, December 31, 1996................   5,500,000      55       26,121      (28,576)       (4,600)         (7,000)     $ 7,506
                                                                                                                           --------
                                                                                                                           --------
Net income................................          --      --           --        6,290            --           6,290        6,290
Additional minimum pension liability......          --      --           --           --           945             945          945
Foreign currency translation adjustments..          --      --           --           --        (1,271)         (1,271)      (1,271)
                                            ----------    ----     --------      -------        -------        -------     --------
Balance, December 31, 1997................   5,500,000      55       26,121      (22,286)       (4,926)         (1,036)     $ 5,964
                                                                                                                           --------
                                                                                                                           --------
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
                                             ---------     ---      -------     ---------      --------        -------     --------
                                             ---------     ---      -------     ---------      --------        -------     --------
</TABLE>

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

                                       24

<PAGE>

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>

                                                                                 1996            1997            1998
                                                                              ----------      ----------      ----------
<S>                                                                          <C>             <C>             <C>
CASH PROVIDED BY
OPERATING ACTIVITIES:

Net income.............................................................         $ 7,214        $ 6,290         $ 7,209
    Adjustments to reconcile net income to
        net cash provided by operating activities:
         LIFO expense..................................................           1,376          3,266          18,614
         Amortization of goodwill......................................           1,978          2,073           2,082
         Depreciation and amortization.................................           4,595          5,455           5,983
         Amortization of debt refinancing fees.........................           1,319          1,498           2,204
         Extraordinary loss on early extinguishment of debt............           1,830             --              --
         Deferred income taxes.........................................             901          1,912          (1,183)
         Other adjustments for non-cash and
               non-operating activities................................             235           (557)            (71)
    Changes in operating assets and liabilities, net of acquisitions:
         (Increase) decrease in trade accounts receivable..............           2,790            690          (7,760)
         (Increase) decrease in other receivables......................           1,094           (679)             76
         (Increase) decrease in inventories............................          (4,096)            69         (29,151)
         Increase in prepaid expenses and other........................          (1,006)           (52)         (1,236)
         Increase (decrease) in trade accounts payable.................           4,410           (253)         (1,007)
         Increase in cigarette and tobacco taxes payable...............           3,368            453           2,726
         Increase (decrease) in other accrued
               liabilities and income taxes payable....................             613         (2,618)          7,447
                                                                                 ------         ------          ------
Net cash provided by operating activities..............................          26,621         17,547           5,933
                                                                                 ------         ------          ------

INVESTING ACTIVITIES:
    Additions to property and equipment................................          (6,079)        (9,378)         (5,311)
    Net assets of acquired businesses..................................              --        (21,361)             --
                                                                                 ------         ------          ------
Net cash used in investing activities..................................          (6,079)       (30,739)         (5,311)
                                                                                 ------         ------          ------

FINANCING ACTIVITIES:
    Issuance of senior subordinated notes..............................          75,000             --              --
    Net borrowings (payments) under revolving credit agreement.........          16,865          3,549         (62,888)
    Debt refinancing fees..............................................          (8,662)            --          (1,579)
    Net proceeds from sale of common stock.............................          39,075             --              --
    Net proceeds from securitization of trade accounts receivable......              --             --          74,000
    Purchases of common shares.........................................        (141,250)            --              --
                                                                                 ------         ------          ------
Net cash provided by (used in) financing activities....................         (18,972)         3,549           9,533
                                                                                 ------         ------          ------

Effects of changes in foreign exchange rates...........................            (248)          (845)           (850)
                                                                                 ------         ------          ------
Increase (decrease) in cash............................................           1,322        (10,488)          9,305
Cash, beginning of year................................................          24,447         25,769          15,281
                                                                                 ------         ------          ------
CASH, END OF YEAR                                                              $ 25,769       $ 15,281        $ 24,586
                                                                               --------       --------        --------
                                                                               --------       --------        --------

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments during the year for:
      Interest.........................................................          $6,732       $ 17,937         $15,201
      Income taxes.....................................................           7,427          2,301           4,523

</TABLE>

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

                                       25

<PAGE>

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

1. ORGANIZATION AND FORM OF BUSINESS

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

       On August 7, 1996, the Company completed a recapitalization as described
in Note 3. Upon completion of the recapitalization, and at December 31, 1996,
1997 and 1998, Jupiter Partners L.P. owned 75% and senior management retained
ownership of 25%, respectively, of the outstanding stock of the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

       EXCISE TAXES

       State and provincial excise taxes paid by the Company on cigarettes were
$479.2 million, $505.4 million and $466.8 million, for the years ended December
31, 1996, 1997 and 1998, 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 $20.3 million and $17.5 million at December 31, 1997 and
1998, 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 $1.4 million, $3.3 million and $18.6 million resulted
from using the LIFO method for the years ended December 31, 1996, 1997 and 1998,
respectively.

                                       26

<PAGE>

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

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 the year ended December 31, 1996 was $2.0 million and
for each of the years ended December 31, 1997 and 1998 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,
1998.

       REVENUE RECOGNITION

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

       STOCK-BASED COMPENSATION PLAN

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

       PENSION COSTS AND OTHER POSTRETIREMENT BENEFIT COSTS

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

       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 7).

       RECLASSIFICATIONS

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

                                       27

<PAGE>

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

3. CAPITAL TRANSACTIONS

       AUGUST 7, 1996 RECAPITALIZATION

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

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

4. FINANCING

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

<TABLE>
<CAPTION>

                                                                    1997         1998
                                                                  --------     --------
        <S>                                                      <C>          <C>
         Accounts receivable facility........................     $      -     $ 74,000
         Revolving credit facility...........................      122,012       59,124
         Senior subordinated notes...........................       75,000       75,000
                                                                  --------     --------

              Long-term debt.................................     $197,012     $208,124
                                                                  --------     --------
                                                                  --------     --------

</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 5.06% as of December 31,
1998. The interest rate on the variable certificates is 0.50% above the
commercial paper rate (as defined in the securitization agreement), which was
4.90% as of December 31, 1998. 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, 1998, the amount outstanding under the Accounts
Receivable Facility was $74.0 million, with sufficient collateral to issue an
additional $11.0 million of variable certificates.

                                       28

<PAGE>

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

4. 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 (the "Term Loan"), which was repaid as discussed below, 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 further reduced
its interest rates, effective October 1, 1998, from 1.0% to 0.75% above the
Prime Rate, and from 2.0% to 1.75% above the Eurodollar Rate, which are the
rates in effect at December 31, 1998. The bank's Prime Rate and Eurodollar Rate
was 7.75% and 5.06%, respectively, at December 31, 1998.

       As of December 31, 1998, the amount outstanding under the Revolving
Credit Facility was $59.1 million; an additional $32.8 million, after taking
into account the borrowing base, was available to be drawn. There is a
commitment fee of 0.375% 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 $8.3 million and $4.9 million
outstanding at December 31, 1997 and 1998, respectively. The letters of credit
are issued primarily to secure the Company's bond and insurance programs. The
Company pays fees of 1.75% 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 1998 amendment to
the Revolving Credit Facility, 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, the
proceeds of which were used to repay in full the Term Loan discussed above and
the subordinated notes discussed in Note 3. Interest on the Notes is payable
semi-annually on March 15 and September 15 of each year. The Notes limit certain
activities of the Company, including, but not limited to, changes in control,
incurrence of indebtedness, creation of liens, acquisitions and dispositions,
investments and dividends.

                                       29

<PAGE>

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

5. COMMITMENTS AND CONTINGENCIES

       LEASES

       The Company leases the majority of its sales and warehouse distribution
facilities, automobiles and trucks under lease agreements expiring at various
dates through 2008, 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, 1998 (in thousands):

<TABLE>
      <S>                                                       <C>
       1999 ...................................................    $11,920
       2000 ...................................................     10,460
       2001 ...................................................      8,737
       2002 ...................................................      5,734
       2003 ...................................................      3,250
       Thereafter..............................................      8,029
                                                                   -------
            Total minimum lease payments.......................     48,130
            Less minimum sublease rental income................       (664)
                                                                   -------
                                                                   $47,466
                                                                   -------
                                                                   -------
</TABLE>

       Rental expense for operating leases was $11.7 million, $13.3 million and
$13.9 million for the years ended December 31, 1996, 1997 and 1998,
respectively.

       CLAIMS AND ASSESSMENTS

       The Company is a defendant to claims seeking damages for injuries 
allegedly arising from the use of tobacco products. The Company has been 
indemnified with respect to certain claims in each of the lawsuits regarding 
tobacco products. The Company 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.

                                       30

<PAGE>

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

6. 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, 1998, and a statement of the December 31 funded status for both years (in
thousands):

<TABLE>
<CAPTION>
                                                       PENSION  BENEFITS                    OTHER BENEFITS
                                                -------------------------------    ------------------------------
                                                     1997            1998               1997           1998
                                                --------------- ---------------    --------------- --------------
<S>                                             <C>             <C>                <C>             <C>
BENEFIT OBLIGATION RECONCILIATION
   January 1 obligation                           $   14,642      $   14,791          $    1,937      $    2,063
   Service cost                                            -               -                  37              22
   Interest cost                                       1,072           1,115                 145             135
   Participant contributions                               -               -                  69              64
   Actuarial (gain)/loss                                 149           1,480                  44             (93)
   Benefit payments                                   (1,072)         (1,136)               (169)           (129)
                                                 ------------    ------------        ------------    ------------
   December 31 obligation                         $   14,791      $   16,250          $    2,063      $    2,062
                                                 ------------    ------------        ------------    ------------
                                                 ------------    ------------        ------------    ------------

FAIR VALUE OF PLAN ASSETS RECONCILIATION
   January 1 fair value of plan assets            $   13,810      $   14,558          $        -      $        -
   Actual return on plan assets                        1,820           1,447                   -               -
   Employer contributions                                  -               -                 100              65
   Participant contributions                               -               -                  69              64
   Benefit payments                                   (1,072)         (1,136)               (169)           (129)
                                                 ------------    ------------        ------------    ------------
   December 31 fair value of plan assets          $   14,558      $   14,869          $        -      $        -
                                                 ------------    ------------        ------------    ------------
                                                 ------------    ------------        ------------    ------------

FUNDED STATUS
   December 31 funded status                      $     (233)     $   (1,381)         $   (2,063)     $   (2,062)
   Unrecognized:
     Unamortized prior service cost                        -               -                (185)           (168)
     Actuarial  loss                                   2,047           3,012               1,048             904
                                                 ------------    ------------        ------------    ------------
   Net amount recognized                          $    1,814      $    1,631          $   (1,200)     $   (1,326)
                                                 ------------    ------------        ------------    ------------
                                                 ------------    ------------        ------------    ------------
</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
                                                -------------------------------    ------------------------------
                                                      1997           1998               1997           1998
                                                --------------- ---------------    --------------- --------------
<S>                                             <C>             <C>                <C>             <C>
   Accrued benefit liability                       $     (233)      $  (1,381)        $    (1,200)    $    (1,326)
   Additional minimum pension
      liability                                         2,047           3,012                   -               -
                                                   ----------       ---------         -----------     -----------
   Net amount recognized                           $    1,814       $   1,631         $    (1,200)    $    (1,326)
                                                   ----------       ---------         -----------     -----------
                                                   ----------       ---------         -----------     -----------
</TABLE>

                                       31

<PAGE>

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

6. EMPLOYEE BENEFIT PLANS (CONT.)

The following table provides components of the net periodic pension and other
benefit cost for fiscal years 1997 and 1998 (in thousands):

<TABLE>
<CAPTION>
                                           PENSION         BENEFITS           OTHER           BENEFITS
                                         -------------------------------    ------------------------------
                                           1997            1998               1997            1998
                                         --------------- ---------------    --------------- --------------
<S>                                      <C>             <C>                <C>             <C>
Service cost                              $           -   $           -      $          37   $         22
Interest cost                                     1,072           1,115                145            135
Expected return on plan assets                     (966)         (1,047)                 -              -
Amortization of:
   Prior service cost                                 -               -                (17)           (17)
   Net actuarial loss                               197             115                 65             50
                                          -------------   -------------      -------------   ------------
Net periodic benefit cost                 $         303   $         183      $         230   $        190
                                          -------------   -------------      -------------   ------------
                                          -------------   -------------      -------------   ------------
</TABLE>

       The amount included within accumulated other comprehensive income in the
Company's consolidated statement of shareholders' equity was $3,012,000 at
December 31, 1998 and $2,047,000 at December 31, 1997.

       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
                                         --------------- ---------------    --------------- --------------
                                           1997            1998               1997            1998
                                         --------------- ---------------    --------------- --------------
<S>                                      <C>             <C>                <C>             <C>
December 31 weighted-average
   assumptions:
   Discount rate                               7.50%           7.00%              7.50%            7.00%
   Expected return on plan assets              7.50            7.50                N/A              N/A
   Rate of compensation increase                N/A             N/A                N/A              N/A
</TABLE>

       For measurement purposes, an 11% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1997 and 10% for
1998. 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               $(23)
Effect on the health care component of the accumulated
   postretirement benefit obligation                                             380               (321)
</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 10% of
their compensation. A contribution of up to 6% is considered to be a "basic
contribution" and the Company makes a matching contribution of $0.50 for each
dollar of a participant's basic contribution. The Company's contributions to the
plans were $1,017,000, $1,158,000 and $1,133,000 for 1996, 1997 and 1998,
respectively.

                                       32

<PAGE>

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

6. EMPLOYEE BENEFIT PLANS (CONT.)

       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.

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

<TABLE>
<CAPTION>
                                                                             1997         1998
                                                                           --------     --------
       <S>                                                                 <C>          <C>
       Options outstanding, beginning of the year....................           --      211,000
            Granted..................................................      213,000       13,000
            Exercised................................................           --           --
            Forfeitures..............................................       (2,000)      (9,000)
                                                                            -------      -------
       Options outstanding, end of year..............................       211,000      215,000
                                                                            -------      -------
                                                                            -------      -------

       Options exercisable at end of year............................           --           --

       Options available for grant at end of year....................       89,000       85,000
</TABLE>

       All of the Company's options granted in 1997 and 1998 have an exercise
price of $10.00 and a weighted-average remaining contractual life of 6.1 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 5.76% for 1997 and
4.76% for 1998; volatility of 0.00%; dividend yield of 0.00%; and an expected
life of the option of 5 years. The weighted-average estimated fair value per
option granted in 1997 and 1998 was $2.47 and $2.10, 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 1997 and 1998 would have been $6,186,000,
and $7,103,000, respectively.

7.   INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                               1996         1997         1998
                                                                            ----------    ---------    --------
         <S>                                                                <C>           <C>          <C>
         Current:
              Federal..................................................       $4,648       $1,646       $4,594
              State....................................................        1,220          648        1,238
              Foreign..................................................          172          628          276
                                                                              ------       ------       ------
                                                                               6,040        2,922        6,108
         Deferred:
              Federal..................................................          733        1,565       (1,590)
              State....................................................          (45)         181          313
              Foreign..................................................          213          166           94
                                                                              ------       ------       ------
                                                                                 901        1,912       (1,183)
                                                                              ------       ------       ------
         Income tax expense............................................       $6,941       $4,834       $4,925
                                                                              ------       ------       ------
                                                                              ------       ------       ------
</TABLE>

                                       33

<PAGE>

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

7.   INCOME TAXES (CONT.)

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

<TABLE>
<CAPTION>
                                                                             1996         1997         1998
                                                                            ------       ------       ------
      <S>                                                                   <C>          <C>          <C>
       Expected federal income tax expense at the statutory rate.....       $5,595       $3,894       $4,247
       Increase (decrease) in taxes resulting from:
            Goodwill amortization....................................          692          692          692
            State income tax expense, net of federal tax benefit.....          952          673          844
            Other, net...............................................         (298)        (425)        (858)
                                                                            ------       ------       ------
       Income tax expense............................................       $6,941       $4,834       $4,925
                                                                            ------       ------       ------
                                                                            ------       ------       ------
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                           1997         1998
                                                                                         --------     --------
         <S>                                                                             <C>          <C>
         Deferred tax assets:
              Net operating loss carryforwards......................................     $  8,908     $  7,953
              Employee benefits, including postretirement benefits..................        3,419        3,847
              Other.................................................................        4,615        6,031
                                                                                         --------     --------
                  Total deferred tax assets.........................................       16,942       17,831
              Less valuation allowance..............................................       (7,742)      (7,153)
                                                                                         --------     --------
                  Net deferred tax assets...........................................        9,200       10,678
                                                                                         --------     --------

         Deferred tax liabilities:
              Inventories...........................................................        8,722        8,077
              Other.................................................................       10,671       11,560
                                                                                         --------     --------
                  Total deferred tax liabilities....................................       19,393       19,637
                                                                                         --------     --------
                  Net deferred tax liabilities......................................     $ 10,193     $  8,959
                                                                                         --------     --------
                                                                                         --------     --------
</TABLE>

       In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. At each balance sheet date, a
valuation allowance has been established against the deferred tax assets based
on management's assessment. During 1996, 1997 and 1998, the Company recorded a
reduction of $1.5 million, $1.6 million and $0.6 million, respectively in the
valuation allowance due to changes in factors affecting the realizability of the
Company's deferred tax assets including generation of taxable income and changes
in limitations on utilization of net operating loss carryforwards.

       At December 31, 1998, the Company has available for U.S. federal income
tax return purposes net operating losses totaling approximately $23.6 million,
subject to certain limitations, which will expire between the years 2005 and
2007. The Company also has available for U.S. income tax return purposes
investment tax credits and alternative minimum tax credits totaling $0.5 million
and $2.9 million, respectively. The investment tax credits expire by the year
2000 while the alternative minimum tax credits have an indefinite utilization
period.

                                       34

<PAGE>

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

8. FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS

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

       The carrying amount of the Revolving Credit Facility and Accounts 
Receivable Facility, 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 $79,313,000 and $76,125,000 at December 31, 1997 and 1998, 
respectively.

9. 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>
                                                                          1996           1997         1998
                                                                        ----------   ----------   ----------
       <S>                                                              <C>          <C>          <C>
       Net sales from external customers.............................   $2,175,367   $2,395,867   $2,476,376
       Segment depreciation and amortization expense (1).............        4,195        4,967        5,435
       Segment interest  expense.....................................       11,245       13,739       13,739
       Segment pre-tax operating income (2)..........................       18,353       19,625       18,631
       Capital expenditures..........................................        6,079        9,378        5,311

       Segment assets................................................                   322,977      341,583
</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
(dollars in thousands):

       INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM

<TABLE>
<CAPTION>
                                                                              1996         1997         1998
                                                                            --------     --------     --------
               <S>                                                          <C>          <C>          <C>
               Segment information ....................................     $ 18,353     $ 19,625     $ 18,631
               Less: Goodwill and other unallocated amortization ......        2,378        2,561        2,630
                     Interest expense: unallocated and other...........       (1,329)       4,442        1,663
                     Amortization of debt refinancing costs ...........        1,319        1,498        2,204
                                                                            --------     --------     --------
               Consolidated total......................................     $ 15,985     $ 11,124     $ 12,134
                                                                            --------     --------     --------
                                                                            --------     --------     --------
</TABLE>

                                       35

<PAGE>

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

9. SEGMENT INFORMATION (CONT.)

         INTEREST EXPENSE

<TABLE>
<CAPTION>
                                                                              1996         1997         1998
                                                                            --------     --------     --------
         <S>                                                                <C>          <C>          <C>
         Segment information...........................................     $ 11,245     $ 13,739     $ 13,739
         Add: Unallocated and other....................................       (1,329)       4,442        1,663
                                                                            ---------     -------     --------
         Consolidated total............................................     $  9,916     $ 18,181     $ 15,402
                                                                            ---------    --------     --------
                                                                            ---------    --------     --------

         DEPRECIATION AND AMORTIZATION

<CAPTION>
                                                                              1996          1997         1998
                                                                            --------     --------     --------
         <S>                                                                <C>          <C>          <C>
         Segment information...........................................     $  4,195      $ 4,967     $  5,435
         Add: Unallocated and other....................................          400          488          548
                                                                            ---------     -------     --------
         Consolidated total............................................     $  4,595      $ 5,455     $  5,983
                                                                            ---------     -------     --------
                                                                            ---------     -------     --------

         ASSETS

<CAPTION>
                                                                                            1997         1998
                                                                                         --------     --------
         <S>                                                                            <C>          <C>
         Segment information...........................................                 $ 322,977    $ 341,583
         Add: Corporate assets.........................................                    13,603       17,807
                                                                                        ---------    ---------
         Consolidated total............................................                 $ 336,580    $ 359,390
                                                                                        ---------    ---------
                                                                                        ---------    ---------
</TABLE>

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

<TABLE>
<CAPTION>
                                                                            1996           1997         1998
                                                                          ----------   ----------   ----------
  <S>                                                                     <C>          <C>          <C>
  Net Sales:
         United States.................................................   $1,639,500   $1,871,149   $2,008,813
         Canada........................................................      535,867      524,718      467,563
                                                                          ----------   ----------   ----------
         Total.........................................................   $2,175,367   $2,395,867   $2,476,376
                                                                          ----------   ----------   ----------
                                                                          ----------   ----------   ----------

  Identifiable Assets:
         United States.................................................                $  279,171   $  305,464
         Canada........................................................                    43,806       36,119
         Corporate.....................................................                    13,603       17,807
                                                                                       ----------   ----------
         Total.........................................................                $  336,580   $  359,390
                                                                                       ----------   ----------
                                                                                       ----------   ----------
</TABLE>

10. ACQUISITION OF THE SOSNICK COMPANIES

       On February 3, 1997, the Company acquired certain assets and the business
of two related companies, Melvin Sosnick Company and Capital Cigar Company
(collectively "Sosnick" or the "Sosnick Companies"), a wholesale distributor to
the convenience retail market in northern California and northern Nevada.

       The assets acquired included trade accounts receivable, inventories and
warehouse equipment. The acquisition excluded the assumption of substantially
all of the liabilities of Sosnick (such as notes payable, trade accounts
payable, commitments to lease warehouse facilities and other liabilities). The
acquisition has been accounted for using the purchase method of accounting, and
the results of operations of Sosnick have been included in the consolidated
financial statements since the date of acquisition. The purchase price for the
assets and the business totaled $21.4 million.

       The excess of the purchase price over the fair value of assets acquired
and liabilities assumed was $4.1 million and has been recorded as goodwill, and
is being amortized on a straight-line basis over a period of 40 years.

                                       36

<PAGE>

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

10. ACQUISITION OF THE SOSNICK COMPANIES (CONT.)

       PRO FORMA INFORMATION (UNAUDITED)

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

11. NEW ACCOUNTING PRONOUNCEMENTS

       In 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting
Comprehensive Income," which prescribes standards for reporting comprehensive
income and its components. Comprehensive income consists of net income or loss
for the current period and other comprehensive income (income, expenses, gains
and losses that currently bypass the income statement and are reported directly
in a separate component of equity). SFAS 130 requires that components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. SFAS 130 is effective for
financial statements issued for periods beginning after December 15, 1997, and
was first reflected in the Company's first quarter of 1998 interim financial
statements. Comprehensive income was included in the Consolidated Statement of
Shareholders' Equity (Deficit) in the Company's consolidated financial
statements for the year ended December 31, 1998.

       In 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 changes the way companies report
segment information and requires segments to be determined and reported based on
how management measures performance and makes decisions about allocating
resources. SFAS 131 is effective for financial statements issued for periods
beginning after December 15, 1997, and is reflected in the Company's
consolidated financial statements for the year ended December 31, 1998 (see Note
9).

       In 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This Statement revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. This Statement
standardizes the disclosure requirements for pensions and other postretirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets that will facilitate
financial analysis and eliminates certain disclosures. Restatement of
disclosures for the prior year has been made for comparative purposes. This
Statement has been adopted by the Company effective December 31, 1998, and is
reflected herein (see Note 6).

       In 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which standardizes the accounting for
derivatives, requiring recognition as either assets or liabilities on the
balance sheet and measurement at fair value. The Company plans to adopt this
statement for fiscal 1999. The Company has not yet determined the effect
adoption of this statement will have on the Company's consolidated financial
position, results of operations or cash flows.

       In 1998, the American Institute of Certified Public Accountants issued 
Statement of Opinion ("SOP") 98-1, "Accounting for the Costs of Computer 
Software Developed or Obtained for Internal Use." This SOP provides guidance 
on accounting for the costs of computer software developed or obtained for 
internal use. This SOP requires that entities capitalize certain internal-use 
software costs once certain criteria are met. Currently, the Company 
generally expenses the costs of developing or obtaining internal-use software 
as incurred. The Company is currently evaluating SOP 98-1, but does not 
expect it to have a material impact on its consolidated financial statements. 
This SOP is effective for the Company's consolidated financial statements for 
the year ended December 31, 1999.

                                       37

<PAGE>

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

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

     (a)   Previous independent accountants

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

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

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

                (iv)  In connection with the audits of the Registrant's
                      consolidated financial statements for the fiscal years
                      ended December 31, 1997 and 1996, and through March 20,
                      1998, there were no disagreements with KPMG Peat Marwick
                      LLP on any matters of accounting principles or practices,
                      financial statement disclosure, or auditing scope or
                      procedure, which disagreements if not resolved to the
                      satisfaction of KPMG Peat Marwick LLP, would have caused
                      KPMG Peat Marwick LLP to make reference to the matter in
                      connection with its report.

                (v)   During the Registrant's two most recent fiscal years and
                      through March 20, 1998, there were no "reportable events"
                      as defined in Item 304 (a)(1)(v) of Regulation S-K.

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

     (b)   New Independent Auditors

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

     (c)   Disagreements with Accountants

                None.

                                       38

<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, 1998):

<TABLE>
<CAPTION>

                       NAME                          AGE                        POSITION
                       ----                          ---                        --------
<S>                                                 <C>       <C>
Gary L. Walsh....................................     57        Chairman and Director
Robert A. Allen..................................     49        President, Chief Executive Officer and Director
Leo Granucci.....................................     60        Senior Vice President, Sales and Marketing
Leo F. Korman....................................     51        Senior Vice President, Chief Financial Officer
                                                                    and Secretary
Basil P. Prokop..................................     55        President, Canada Division
J. Michael Walsh.................................     50        Senior Vice President, Distribution
Thomas A. Berglund...............................     38        Director
Terry J. Blumer..................................     40        Director
John F. Klein....................................     35        Director
John A. Sprague..................................     46        Director

</TABLE>

       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, and as
Vice President, Distribution from 1989 to 1992. He has been a director of the
Company since 1994.

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

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

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

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

       THOMAS A. BERGLUND has been a director of the Company since August 1996.
He is a Principal 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 Principal 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. He is a director of
Harmon Industries.

                                       39
<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, 1998, 1997 and 1996.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                              ANNUAL COMPENSATION
                                                                              -------------------
                                                                                                      ALL OTHER
                                                                    FISCAL    SALARY       BONUS    COMPENSATION
NAME AND PRINCIPAL POSITION                                          YEAR       ($)         ($)     ($)(1)(2)(3)
---------------------------                                          ----       ---         ---     ------------
<S>                                                                 <C>     <C>         <C>        <C>
Robert A. Allen.......................................               1998    $298,077    $300,000        $7,882
  President and Chief Executive Officer                              1997    $250,000    $ 87,000        $7,203
                                                                     1996    $247,457    $102,000        $7,658

Leo Granucci..........................................               1998    $208,483    $125,000        $7,151
  Senior Vice President, Sales and Marketing                         1997    $200,762    $ 74,000        $6,801
                                                                     1996    $200,465    $ 50,000        $7,190

Leo F. Korman.........................................               1998    $206,524    $140,000        $7,135
  Senior Vice President and Chief Financial Officer                  1997    $198,875    $ 74,000        $6,786
                                                                     1996    $198,581    $ 95,000        $7,082

J. Michael Walsh......................................               1998    $198,581    $110,000        $7,070
  Senior Vice President, Distribution                                1997    $191,226    $ 60,000        $6,663
                                                                     1996    $190,693    $ 52,500        $6,484

Basil P. Prokop.......................................               1998    $161,812    $ 21,565        $5,003
  President, Canada Division                                         1997    $162,665    $ 64,996        $5,240
                                                                     1996    $165,528    $ 35,339        $3,729

</TABLE>

-----------

(1)  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. Granucci, $4,800; Mr. Korman, $4,800; and Mr. J.M.
     Walsh, $4,800; (ii) Company matching contributions to the Registered
     Retirement Savings Plan (defined below) for Mr. Prokop, $3,033; (iii) life
     and other insurance premiums in the following amounts: Mr. Allen, $3,082;
     Mr. Granucci, $2,351; Mr. Korman, $2,335; Mr. J.M. Walsh, $2,270; and Mr.
     Prokop, $1,970.
                                       40

<PAGE>

EXECUTIVE COMPENSATION (CONT.)

(2)  These figures for 1997 consist of the sum of: (i) Company matching
     contributions to the Savings Plan (defined below) in the following amounts:
     Mr. Allen, $4,500; Mr. Granucci, $4,500; Mr. Korman, $4,500; and Mr. J.M.
     Walsh, $4,440; (ii) Company matching contributions to the Registered
     Retirement Savings Plan (defined below) for Mr. Prokop, $3,250; (iii) life
     and other insurance premiums in the following amounts: Mr. Allen, $2,703;
     Mr. Granucci, $2,301; Mr. Korman, $2,286; Mr. J.M. Walsh, $2,223; and Mr.
     Prokop, $1,990.

(3)  These figures for 1996 consist of the sum of: (i) Company matching
     contributions to the Savings Plan (defined below) in the following amounts:
     Mr. Allen, $4,750; Mr. Granucci, $4,711; Mr. Korman, $4,620; Mr. J.M.
     Walsh, $4,094; (ii) Company matching contributions to the Registered
     Retirement Savings Plan (defined below) for Mr. Prokop, $1,716; (iii) life
     and other insurance premiums in the following amounts: Mr. Allen, $2,908;
     Mr. Granucci, $2,479; Mr. Korman, $2,462; Mr. J.M. Walsh, $2,390; and Mr.
     Prokop, $2,013.

CERTAIN AGREEMENTS WITH MANAGEMENT

       Each member of the Company's top five executive officers 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
other than as a result of such officer's resignation for Good Reason (as defined
therein), the Company may, in its sole discretion, continue to pay to such
officer, for a period of up to one year following such termination, such
officer's base salary as in effect on the effective date of such termination.
Under 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 if such officer's employment with the Company terminates
for Cause or as a result of his resignation other than for Good Reason.

INDEMNIFICATION AGREEMENTS

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

THE SAVINGS PLAN

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

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

       Each participant has a fully vested (nonforfeitable) interest in all
contributions made by the individual and all earnings thereon. Each participant
must be employed at the end of each quarter to receive an allocation of matching
contribution for the most recent calendar quarter.

       The amount of Company matching contributions that the following officers
have accrued in the Savings Plan as of December 31, 1998 is as follows: Robert
A. Allen $28,756; Leo Granucci $15,426; Leo F. Korman $28,013; and J. Michael
Walsh $28,639.
                                       41

<PAGE>

THE REGISTERED RETIREMENT SAVINGS PLAN (CANADA)

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

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

       Basil P. Prokop has $27,811 of Company matching contributions in the
Registered Retirement Savings Plan as of December 31, 1998.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       The following table sets forth as of December 31, 1998, certain
information regarding the beneficial ownership of the common stock of the
Company (i) by each person who is known by the Company to own beneficially more
than 5% of the outstanding shares of common stock of the Company, (ii) by each
of the Company's directors and executive officers and (iii) by all directors and
executive officers as a group. The Company believes that the beneficial owners
of the securities listed below, based on information furnished by such owners,
have sole investment and voting power with respect to all the shares of common
stock of the Company shown as being beneficially owned by them.

<TABLE>
<CAPTION>

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

</TABLE>

-----------

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

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

                                       42
<PAGE>

STOCKHOLDERS AGREEMENT

       On August 7, 1996, the Company entered into a Stockholders Agreement (the
"Stockholders Agreement") with Jupiter, the five executive officers and one
former executive officer listed in the table above (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, 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.

                                      43
<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 19, are included herein.

         2.   Financial Statement Schedule

         The following financial statement schedule of Core-Mark International,
Inc. for the fiscal years ended December 31, 1996, 1997, and 1998 is filed as
part of this Report and should be read in conjunction with the Consolidated
Financial Statements of Core-Mark International, Inc. and subsidiaries.

         Schedule II - Valuation and Qualifying Accounts

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

         3.   Exhibits

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

<TABLE>
<CAPTION>

         EXHIBIT
         NUMBER                            EXHIBIT
         --------                          -------
       <S>       <C>
         2.1      Stock Subscription Agreement, dated June 17, 1996, by and
                  among Jupiter Partners, L.P., as amended, 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 (Filed herewith).

         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).

                                        44
<PAGE>

         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).

         10.1.1   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).

         *10.1.2  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).

         10.2.1   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).

         *10.2.2  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).

         10.3.1   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).

         10.3.2   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).

                                       45

<PAGE>

         10.9     Purchase Agreement dated January 31, 1997 between the Company
                  and Melvin Sosnick Company and Capital Cigar Company,
                  incorporated herein by reference from Exhibit (i) to Core-Mark
                  International, Inc.'s Current Report on Form 8-K filed
                  February 18, 1997 (Registration No. 333-14217).

         10.10    $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).

         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).

         16       Letter to Securities and Exchange Commission from KPMG Peat
                  Marwick LLP dated January 27, 1998 from Exhibit 16 to
                  Core-Mark International Inc.'s Current Report on Form 8-K
                  filed January 27, 1998 (Registration No. 333-14217),
                  incorporated herein by reference from exhibit 16 to Core-Mark
                  International, Inc. Annual Report on Form 10-K filed March 20,
                  1998 (Registration No. 333-14217).

         16.1     Letter to Securities and Exchange Commission from KPMG Peat
                  Marwick LLP dated March 20, 1998, incorporated herein by
                  reference from exhibit 16.1 to Core-Mark International Inc.
                  Annual Report on Form 10-K filed March 20, 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).

         27       Financial Data Schedule

                                        46

<PAGE>

         *        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.

</TABLE>

(b)      Reports on Form 8-K

         None.

                                       47

<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 19, 1999.

                                          CORE-MARK INTERNATIONAL, INC.

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

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

<TABLE>
<CAPTION>

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

           /s/ Gary L. Walsh
--------------------------------------
             Gary L. Walsh                                      Chairman and Director                      March 19, 1999


          /s/ Robert A. Allen
--------------------------------------
            Robert A. Allen                        President, Chief Executive Officer and Director         March 19, 1999


           /s/ Leo F. Korman
--------------------------------------
             Leo F. Korman                       Senior Vice President, Chief Financial Officer and        March 19, 1999
                                                            Principal Accounting Officer


         /s/ Thomas A. Berglund
--------------------------------------
           Thomas A. Berglund                                         Director                             March 19, 1999


          /s/ Terry J. Blumer
--------------------------------------
            Terry J. Blumer                                           Director                             March 19, 1999


           /s/ John F. Klein
--------------------------------------
             John F. Klein                                            Director                             March 19, 1999


          /s/ John A. Sprague
--------------------------------------
            John A. Sprague                                           Director                             March 19, 1999

</TABLE>


                                       48

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To The Board of Directors
Core-Mark International, Inc.

We have audited the accompanying consolidated balance sheet of Core-Mark
International, Inc. and subsidiaries (the "Company") as of December 31, 1998 and
the related consolidated statements of income, shareholders' equity (deficit)
and cash flows for the year ended December 31, 1998 and have issued our report
thereon dated February 25, 1999; such report is included elsewhere in this Form
10-K. Our audit also included the 1998 financial statement schedule of the
Company listed in Item 14 (a) 2. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit. In our opinion, such 1998 financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.




                            /s/ Deloitte & Touche LLP





SAN FRANCISCO, CALIFORNIA
FEBRUARY 25, 1999






                                        49

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To The Board of Directors
Core-Mark International, Inc.

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

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



                                      /s/  KPMG LLP




SAN FRANCISCO, CALIFORNIA
FEBRUARY 20, 1998






                                       50

<PAGE>

                                                                     SCHEDULE II

                 CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
                                 (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,
   1996................................             $ 3,600          $  895           $    _         $ (614)(a)       $ 3,881
   1997................................               3,881           1,237                _         (2,168)(a)         2,950
   1998................................               2,950             810                _           (999)(a)         2,761

</TABLE>

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







                                       51