UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  

As of February 24, 2017,25, 2019, the registrant had 46,315,36445,870,201 shares of its common stock outstanding.

The information called for by Part III of this Form 10-K will be included in an amendment to this Form 10-K or incorporated by reference to the registrant’s 20172019 definitive proxy statement to be filed pursuant to Regulation 14A.

Unless the context indicates otherwise, all references in this Annual Report on Form 10-K to “Core-Mark,” “the Company,” “we,” “us,” or “our” refer to Core-Mark Holding Company, Inc. and its subsidiaries.

Company Overview

Core-Mark is one of the largest wholesale distributors to the convenience retail industry in North America, providing sales, marketing, distribution and logistics services to overapproximately 43,000 customer locations across the United States (U.S.(“U.S.”) and Canada through 3032 distribution centers (excluding two distribution facilities we operate as a third partythird-party logistics provider). Our origins date back to 1888, when Glaser Bros., a family-owned-and-operated candy and tobacco distribution business, was founded in San Francisco, California.

Our mission is to be the most valued marketer of fresh and broad-line supply solutions to the convenience retail industry. While the past century has brought incredible changes to our business and the world in whichIn that pursuit, we operate, our goal is the same today as it was over 125 years ago - to provide customers with the best possible service and to help them grow theirare focused on three key strategic priorities: growing sales and profits.margin faster than the industry, building on our leadership position in providing category management solutions, and leveraging our cost structure. We have grownalso been successful in growing our business organically and through strategic acquisitions which have expandedallowed us to expand our distribution network, product selection and customer base.

Core-Mark has becomeis one of two national distributors to the convenience store industry in the U.S. and is the largest in Canada. TheOur established national market presence we have established rests primarily with our ability to service customers in every geographic region within the U.S. through 2527 distribution centers and servicingto service customers in Canada withthrough our five Canadian distribution centers.

Company Highlights

Business Strategy

Our objective is to increase overall return to stockholders by growing faster and more profitable than our revenuesindustry, being the industry leader in category management solutions and leveraging operating costs to increase profitability. As one of the largest marketers of fresh and broad-line supply solutions to the convenience retail industry in North America with a track record of effectively selling into other retail channels, we believe we are well-positioned to continue meetingmeet this objective.objective moving forward. Our business strategy also includes the following initiatives, designed to further enhance the value we provide to our retail customers:

Competitive Strengths

We believe we have the following fundamental competitive strengths, which form the foundation for our business strategy:

Customers

We service overapproximately 43,000 customer locations in all 50 states in the U.S. and, five Canadian provinces.provinces and one Canadian territory. Our primary customer base consists of traditional convenience stores, as well as alternative outlets selling consumer packaged goods. Our traditional convenience store customers include many of the major national and super-regional convenience store operators, as well as independently owned convenience stores. Our alternative outlet customers comprise a variety of store formats, including grocery stores, drug stores, big box or supercenter stores, liquor stores, cigarette and tobacco shops, hotel gift shops, military exchanges, college and corporate campuses, casinos, hardware stores, airport concessions and other specialty and small format stores that carry convenience products.

Our top ten customers accounted for 43.2%39.4% of our net sales in 2016. Our largest customers were2018 including Murphy U.S.A., our largest customer, which the Company began servicing in the first quarter of 2016, and Alimentation Couche-Tard, Inc. ("Couche-Tard"). Murphy U.S.A and Couche-Tard accounted for 12.0% and 11.4%11.9% of our total net sales, respectively.sales.

Products

We purchase a variety of brand name and private label products, in excess of 53,000representing approximately 58,000 stock keeping units ("SKUs"(“SKUs”), from suppliers and manufacturers. Cigarette products represent less than 5% of our total SKUs purchased. We offer customers a variety of food/non-food products, including fast food, candy, snacks, groceries, fresh products, dairy, bread, beverages, other tobacco products, alternative nicotine products, general merchandise, and health and beauty care products.

Below is a comparison of our net sales mix by primary product category for the last three years (in millions)millions, except percentages):

In 20162018, our cigarette carton sales in the U.S. and Canada increased 34.5%decreased 3.9% and 13.8%1.8%, respectively, benefiting from market share gains, includingrespectively. Excluding the addition of Murphy U.S.A,Farner-Bocken, we had a 6.7% decrease in carton sales (7.1% and 1.8% for the U.S. and Canada, respectively) compared to 2017, which was partially offset by a 4.7% increase in the average sales price per carton. The decrease in carton sales in the U.S.

was driven primarily by a general decline in the consumption of cigarettes, which was greater in 2018 compared to historical norms, and the acquisitionexpiration of Pine State Convenience. our distribution agreement with Kroger Convenience (“Kroger”). The increase in the average sales price per carton was due primarily to increases in cigarette manufacturers’ prices and increases in excise taxes in certain jurisdictions.

In the industry overall, U.S. and Canadian cigarette consumption steadily declined over the last decade. Based on data compiled from the U.S. Department of Agriculture - Economic Research Service and provided by the Tobacco Merchants Association ("TMA"(“TMA”), total cigarette consumption in the U.SU.S. declined from 389351 billion cigarettes in 20062008 to 275249 billion cigarettes in 2015,2017, or a compounded annual decline of approximately 3.8%3.4%. Total cigarette consumption declined in Canada from 3228 billion cigarettes in 20062008 to 2725 billion cigarettes in 2015,2017, or a compounded annual decline of approximately 1.9%1.1% based on statistics provided by the TMA. More recently, a greater decline in total cigarette consumption has been partially offset by consumption of alternative nicotine products and OTP. Although we anticipate overall cigarette consumption will continue to decline, we expect to offset these declines through market share expansion,continued growth in our non-cigarette categories including alternative nicotine products and OTP, market share expansion and incremental gross profit from cigarette manufacturer price increases.

Excise taxes are levied on cigarettes and other tobacco products by the U.S. and Canadian federal governments and are also imposed by various states, localities and provinces. We collect state, local, and provincial excise taxes from our customers and remit these amounts to the appropriate authorities based on the credit terms, if applicable, extended by each jurisdiction. Net sales and cost of sales included offsettingincludes amounts related to state, local and provincial excise taxes which were approximately $3.5 billion for both 2018 and 2017, and approximately $3.0 billion $2.2 billion and $2.1 billion in 2016, 2015 and 2014, respectively.2016.

Suppliers

We purchase products for resale from approximately 5,0005,800 trade suppliers and manufacturers located across the U.S. and Canada. In 2016,2018, we purchased approximately 79%80% of our products from our top 20 suppliers, with our top two suppliers, Altria Group, Inc. (the parent company of Philip Morris USA, Inc.) and R.J. Reynolds Tobacco Company, accounting for approximately 35%33% and 23% of our purchases, respectively. We coordinate our purchasing from suppliers by negotiating, on a corporate-widecompany-wide basis, special arrangements to obtain volume discounts and additional incentives, while also taking advantage of promotional and marketing incentives offered to us as a wholesale distributor. In addition, buyers in each of our distribution facilities purchase products directly from the manufacturers, improving product mix and availability for individual markets.

As of December 31, 2016,2018, we operated a network of 3032 primary distribution centers in the U.S. and Canada (excluding two distribution facilities we operate as a third partythird-party logistics provider). Twenty-fiveTwenty-seven of our distribution centers are located in the U.S. and five are located in Canada.

The map below depicts the scope of our operations and the names of our distribution centers.

We operate fourfive consolidation centers which buy products from our suppliers in bulk quantities and then re-distributeredistribute the products to many of our other distribution centers. The products purchased by our consolidation centers may include frozen and chilled items, candy, snacks, beverages, health and beauty care and general merchandise products. We operate two additional facilities as a third partythird-party logistics provider. One distribution facility located in Phoenix, Arizona, referred to as the Arizona Distribution Center ("ADC"), isprovider dedicated solely to supporting the logistics and management requirements of one of our major customers, Couche-Tard. The secondAlimentation Couche-Tard, Inc. (“Couche-Tard”). These distribution facilityfacilities are located in Phoenix, Arizona and San Antonio, Texas, referred to as the Retail Distribution Center ("RDC"), is dedicated solely to supporting another major customer, CST Brands, Inc.Texas.

Our proprietary Distribution Center Management System platform provides our distribution centers with the flexibility to adapt rapidly to changing business needs and allows them to provide our customers with necessary information technology requirements and integration capabilities.

Distribution

AtAs of December 31, 2016,2018, we hademployed approximately 1,8002,000 personnel in our transportation department, personnel, including delivery drivers, shuttle drivers, routers, training supervisors and managers, whoall of whom focus on achieving safe, on-time deliveries. Our daily orders are picked and loaded nightly in reverse order of scheduled delivery.route sequence, with the majority reaching their destination within 24 hours. At December 31, 2016,2018, our distribution fleet primarily consisted of nearlyapproximately 1,500 leased tractors and trailers with over 500and approximately 1,200 additional owned tractors and trailers. We have made a significant investment over the past few years in upgrading ourOur “tri-temp” trailer fleet to tri-temp, which gives us the capability to deliver frozen, chilled and non-refrigerated goods in one delivery. As of December 31, 2016, approximately 97% of our trailers were tri-temp, with the remainder capable of

As of December 31, 2018, approximately 16% of our trucks ran on Compressed Natural Gas ("CNG"(“CNG”), which allows us to reduce our carbon footprint and lower our transportation costs. As of December 31, 2016, approximately 20% of our trucks ran on CNG. To date, we have openedWe utilize seven CNG stations, two of which we own located(located in Wilkes-Barre, Pennsylvania and Corona, California, and theCalifornia). The other five are operated in partnership with U.S. Oil and are located in Aurora, Colorado, Forrest City, Arkansas, Sanford, North Carolina, Atlanta, Georgia and Tampa, Florida(a division of U.S. Venture, Inc.) under the name GAIN Clean Fuel ("GAIN"(“GAIN”). and are located in Aurora, Colorado; Forrest City, Arkansas; Sanford, North Carolina; Atlanta, Georgia and Tampa, Florida. In addition to providing fuel to our fleet, the GAIN stations are also open to other public fleets for fueling.

Competition

Competition within the industry is based primarily on the range and quality of the services provided, price, product selection and the reliability of wholesalers’ logistics as well as proximity to the customer'scustomer’s stores. We operate from a perspective that focuses heavily on flexibility and providing outstanding customer service, through our distribution centers, order fulfillment rates, on-time delivery, innovative marketing solutions and merchandising support as well as competitive pricing.

Core-Mark is one of the two largest wholesale convenience distributors (measured by annual sales) serving North America. We believeservice both convenience store chain customers and independent operators with ten or fewer stores which comprise approximately 66% of the convenience retail store market. The McLane Company, Inc., a subsidiary of Berkshire Hathaway Inc., and Core-Mark are the twoour largest competitor, focuses on servicing large regional or national convenience wholesale distributors (measured by annual sales)store chains as well as chain customers in North America.other trade channels. There are two other large companies that cover the eastern half of the U.S:U.S.: The H.T. Hackney Company and the Eby BrownEby-Brown Company. In addition, there are hundreds ofmany local distributors serving small regional chains and independent convenience retailers. In Canada, in addition to Core-Mark, there is one large national company,several companies make-up the competitive landscape. Wallace & Carey, Inc., one regional company which serviceshas national distribution capabilities. Pratts Wholesale Limited, regionally serves the Manitoba, Saskatchewan, and Alberta markets, Pratts Wholesale Limited, and onemarkets. Sobeys Inc. is a large national convenience store and grocery wholesaler, Sobeys Inc., aside from Core-Mark, that make up the competitive landscape.wholesaler.

Beyond the traditional wholesale supply channels, we face potential competition from at least three other supply avenues. First, certain consumer product manufacturers such as Anheuser-Busch Companies, Inc., MillerCoors LLC, The Coca-Cola Company, and PepsiCo (including its Frito-Lay, Inc., a division of PepsiCo, Inc. ("PepsiCo") and PepsiCo division) deliver their products directly to convenience retailers. Secondly, club wholesalers such as Costco Wholesale Corporation ("Costco") and Sam’s West, Inc. ("(“Sam’s Club"Club”) provide a limited selection of products at generally competitive prices; however, they often have limited delivery options and limited services. Finally, some large convenience retail chains self-distribute products due to the geographic density of their stores and their belief that they can economically service such locations.

We face competition from the diversion into thecertain U.S. and Canadian markets of cigarettes intended for sale outside of suchthese markets, including the sale of cigarettes in non-taxable jurisdictions, inter-state/provincial and international smuggling of cigarettes, the sale of counterfeit cigarettes by third parties, increased imports of foreign low priced brands, the sale of cigarettes by third parties over the internet and by other means designed to avoid collection of applicable taxes. The competitive environment has been characterizedheightened by a continued influx of cheapgeneric products, tobacco, and tobacconicotine alternatives including electronic cigarettes that challenge sales of higher priced and fully taxed cigarettes.

Working Capital Practices

We sell products on credit terms to our customers that averaged, as measured by days sales outstanding, about nine days for each of 2016, 20152018, 2017 and 2014.2016. Credit terms may impact pricing and are competitive within our industry. Many of our customers remit payment electronically, which facilitates efficient and timely monitoring of payment risk. Canadian days sales outstanding in receivables tend to be lower as Canadian industry practice is for shorter credit terms than in the U.S.

We maintain our inventory of products based on the level of sales of the particular product and manufacturer replenishment cycles. The number of days a particular item of inventory remains in our distribution centers varies by product and is principally driven by the turnover of that product and economic order quantities. We typically order and carry in inventory additional amounts of certain critical products to assure high order fulfillment levels for these items. Periodically, we may carry higher levels of inventory to take advantage of anticipated manufacturer price increases. The number of days of cost of sales in inventory averaged about 14 days, 16 days and 15 days, in 2018, 2017 and 2016, and 16 days in both 2015 and 2014.respectively. The cigarette category averaged nineseven days, teneleven days and nine days, in 2016, 20152018, 2017 and 2014,2016, respectively. The food/non-food categories averaged 25 days, 29 days and 27 days in 2018, 2017 and 2016, and 29 days in both 2015 and 2014.respectively.

We obtain terms from our vendors and certain taxing jurisdictions based on industry practices, consistent with our credit standing. We take advantage of the full complement of term offerings, which may include enhanced cash discounts for earlier payment or prepayment. Terms for our accounts payable and cigarette and tobacco taxes payable range anywhere from one daytwo days prepaid to 60 days credit. Days payable outstanding for both categories, excluding the impact of prepayments, during each of 2018, 2017 and 2016 2015 and 2014 averaged about 11 days.

Employees

The following chart provides a breakdown of our employees by function and geographic region (including employees at our third partythird-party logistics facilities) as of December 31, 2016:2018:

As a distributor of food products in the U.S., we are subject to the Federal Food, Drug and Cosmetic Act and regulations promulgated by the U.S. Food and Drug Administration ("FDA"(“FDA”). In Canada, similar standards related to food and over-the-counter medications are governed by Health Canada. The products we distribute are also subject to federal, state, provincial and local regulation through such measures asas: the licensing of our facilities,facilities; enforcement by state, provincial and local health agencies of relevant standards for the products we distributedistribute; and regulation of our trade practices in connection with the sale of our products. Our facilities are inspected periodically by federal, state, provincial and local authorities, including the Occupational Safety and Health Administration ("OSHA"(“OSHA”) under the U.S. Department of Labor, which require us to comply with certain health and safety standards to protect our employees.

We are also subject to regulation by the U.S. and Canadian Departments of Transportation, which regulate transportation of perishable goods, and similar state, provincial and local agencies. Our distribution centers in the U.S. and Canada are subject to a broad spectrum of federal, state, provincial and local environmental protection statutes including those that govern the emissions to air, soil and water, and the disposal of hazardous substances.

Our policy is to comply with all regulatory and legal requirements, and management is not aware of any related issues that may have a material effect upon our business, financial condition or results of operations.

Registered Trademarks

Segment and Geographic Information

Seasonality

Corporate and AvailableContact Information

Our business is subject to a variety of risks. Set forth below are certain of the important risks that we face, the occurrence of which may have a material effect on our business, financial condition or results of operations.

Our ability to operate effectively could be impaired by the risks and costs associated with expansion activities.

Our business has expanded rapidly and market share growth is one of our key company initiatives. To accomplish this growth, we have focused on strategic acquisitions and securing large regional and national customers as key elements of success. Any significant expansion activity comes with inherent risks. Acquisitions may entail various risks, such as identifying suitable candidates, realizing acceptable rates of return on the investment, identifying potential liabilities, obtaining adequate financing, negotiating acceptable terms and conditions, and successfully integrating operations and converting systems post acquisition. Integrating a large new customer has similar risks ofrelated to realizing acceptable returns on invested working capital and negotiating acceptable pricing and service levels, while managing resources and business interruptions as we integrate the new business into our current infrastructure. We may realize higher costs, lower margins or fewer benefits than originally anticipated and may experience disruption to our base business in connection with such acquisitions and other new customer integration activities.

Our failure to maintain relationships with large customers could potentially harm our business.

We have relationships with many large regional and national convenience and other store chains. While we expect to maintain these relationships for the foreseeable future, any termination, non-renewal or reduction in services that we provide to such customers could cause our revenues and operating results to suffer.

In the past, certain large manufacturers and customers have elected to engage in direct distribution or third partythird-party distribution of their products and eliminateceased relying on wholesale distributors such as Core-Mark. Similarly, manufacturers or other providers may choose to move their product distribution to Amazon or other e-commerce providers. If other manufacturers or retail customers make similar elections in the future, our revenues and profits would be adversely affected and there can be no assurance that we will be able to mitigate such losses.

Our business is sensitive to fuel prices and related transportation costs, which could adversely affect our business.

Cigarette and consumable goods distribution is a low-margin business sensitive to inflation and deflation.

We derive most of our revenues from the distribution of cigarettes, other tobacco products, candy, snacks, fast food, groceries, fresh products, dairy, beverages, general merchandise and health and beauty care products. Our industry is characterized by a high volume of sales with low profit margins. Our food/non-food sales are generally priced based on the manufacturer’s cost of the product plus a percentage markup. As a result, our profit levels may be negatively impacted during periods of cost deflation or stagnation for these products, even though our gross profit as a percentage of the price of goods sold may remain relatively constant. In addition, periods of product cost inflation may have a negative impact on our gross profit margins with respect to sales of cigarettes because gross profitprofits on cigarette sales are generally fixed on a cents per carton basis. Therefore, as cigarette prices increase, gross profit generally decreases as a percentage of sales. In addition, if the cost of the cigarettes that we purchase increases due to manufacturer price increases, reduced or eliminated manufacturer discounts and incentive programs, or increases in applicable excise tax rates, our inventory carrying costs and accounts receivable could rise, placing pressure on our working capital requirements.

We rely on manufacturer discount and incentive programs and cigarette excise stamping allowances, and any material changes in these programs could adversely affect our results of operations.

We receive payments from the manufacturers on the products we distribute for allowances, discounts, volume rebates and other merchandising and incentive programs. These payments are a substantial contributor to our gross profit. The amount and timing of these payments are affected by changes in the programs by the manufacturers, our ability to sell specified volumes of a particular product, attaining specified levels of purchases by our customers and the duration of carrying a specified product. In addition, we receive discounts from certain taxing jurisdictions in connection with the collection of excise taxes. If the manufacturers or taxing jurisdictions change or discontinue these programs or change the timing of payments, or if we are unable to maintain the volume of our sales required by such programs, our results of operations could be negatively affected.

We depend on relatively few suppliers for a large portion of our products, and any interruptions in the supply of the products that we distribute could adversely affect our results of operations.

We obtain the products we distribute from third partythird-party suppliers. At December 31, 2016,2018, we had approximately 5,0005,800 vendors and during 20162018 we purchased approximately 79%80% of our products from our top 20 suppliers, with purchases from our top two suppliers, Altria Group, Inc. (parent of Philip Morris USA, Inc.) and R.J. Reynolds Tobacco Company, representing approximately 35%33% and 23% of our purchases, respectively. We do not have any long-term contracts with our suppliers committing them to provide products to us. Our suppliers may not provide the products we distribute in the quantities we request on favorable terms, or at all. We are also subject to delays caused by interruptioninterruptions in production due to conditions outside our control, such as slow-downs or strikes by employees of suppliers, inclement weather, transportation interruptions, regulatory requirements and natural disasters. Our inability to obtain adequate supplies of the products we distribute could cause us to fail to meet our contractual and other obligations to our customers and reduce the volume of our sales and profitability.

We may be subject to product liability claims and counterfeit product claims which could materially adversely affect our business.

As a distributor of food and consumer products, we face the risk of exposure to product liability claims in the event that the use of a product sold by us causes injury or illness. In addition, certain products that we distribute may be subject to counterfeiting. Our business could be adversely affected if consumers lose confidence in the safety and quality of the food and other products we distribute. Further, our operations could be subject to disruptions as a result of manufacturer recalls. This risk may increase as we continue to expand our distribution of fresh products. If we do not have adequate insurance, if contractual indemnification

We may not be able to achieve the expected benefits from the implementation of marketing initiatives.

We are continuously improving our competitive performance through a series of strategic marketing initiatives.initiatives, such as Focused Marketing Initiative, SmartStock and Vendor Consolidation Initiative. The goal of this effort is to develop and implement a comprehensive and competitive business strategy, addressing the special needs of the convenience industry environment, increasing our market position within the industry and ultimately creating increased stockholder value. Customer acceptance of our new marketing initiatives may not be as anticipated or competitive pressures may cause us to curtail or abandon these initiatives, resulting in lower revenue growth and unachieved cost savings.profit growth.

Maintaining our brand and reputation is necessary for the success of our business.

We may be subject to various claims and lawsuits that could result in significant expenditures.

The nature of our business exposes us to the potential for various claims and litigation related to labor and employment, personal injury, property damage, business practices, environmental liability and other matters. Any material litigation or a catastrophic accident or series of accidents could have a material adverse effect on our business, financial position, and results of operations and cash flows.

Unions may attempt to organize our employees.

As of December 31, 2016, 325,2018, approximately 400 or approximately 4%5%, of our employees were covered by collective bargaining agreements with labor organizations, whichunder agreements that expire at various times. We cannot assure that we will be able to renew our respective

Employee health benefit costs represent a significant expense to us and may negatively affect our profitability.

Changes to minimum wage laws and other governmental legislation or regulations could increase our costs substantially.

As of December 31, 2016,2018, we believe we had no employees who were paid under the minimum wage in their respective locations. Several bills have been introduced in the U.S. legislature over the past few years to increase the federal minimum wage. In addition, certain states have adopted or are considering adopting minimum wage statutes that exceed the federal minimum wage rate. Any increases in federal or state minimum wages could require us to increase the wages paid to our minimum wage employees and create pressure to raise wages for other employees who already earn above-minimum wages. Further, changes to wage and hour laws and/or new legislation increasing mandatory paid leave can add costs to our business. If we are unable to pass these additional labor costs on to our customers in the form of increased prices or surcharges, our business and results of operations would be adversely affected.

If we are unable to comply with governmental regulations that affect our business or if there are substantial changes in these regulations, our business could be adversely affected.

As a distributor of food and other consumable products, we are subject to regulation by the FDA, Health Canada and similar regulatory authorities at the federal,state, provincial and local levels. In addition, our employees operate tractor trailers, trucks, forklifts and various other powered material handling equipment, and we are therefore subject to regulation by the U.S. and Canadian Departments of Transportation. Our operations are also subject to regulation by OSHA, the U.S. Drug Enforcement Administration and a myriad of other federal, state, provincial and local agencies. Each of these regulatory authorities has broad administrative powers with respect to our operations. Regulations, and the costs of complying with those regulations, have been increasing in recent years. If we fail to adequately comply with government regulations, we could experience increased inspections or audits, regulatory authorities could take remedial action including imposing fines, suspending or canceling our licenses, or shutting down our operations, or we could be subject to increased compliance costs. If any of these events were to occur, our results of operations would be adversely affected.

Natural disaster damage could have a material adverse effect on our business.

Our headquarters and several of our warehouses in California, and one warehouse located near Vancouver, British Columbia, Canada, are in or near high hazard earthquake zones. We also have operations in areas that have been affected by natural disasters such as hurricanes, tornados, floods, and ice and snow storms. While we maintain insurance to cover us for certain potential losses, our insurance may not be sufficient in the event of a significant natural disaster, or payments under our policies may not be received timely enough to prevent adverse impacts on our business. Our customers could also be affected by likesimilar events, which could adversely affect our sales and results of operations. While we maintain insurance to cover us for certain potential losses and maintain two data centers in geographically disparate locations, each of which can provide core services for the other if required, in the event of a natural disaster our insurance may not be sufficient to cover our losses, insurance payments may be delayed and our business may nevertheless be interrupted and adversely affected.

Insurance and claims expenses could have a material adverse effect on us.

We have a combination of both self-insurance and high-deductible insurance programs for the risks arising out of the services we provide and the nature of our operations throughout North America, including claims exposure resulting from personal injury, property damage, business interruption and workers’ compensation. Workers’ compensation, automobile and general liabilities are determined using actuarial estimates of the aggregate liability for claims incurred and an estimate of incurred but not reported claims. Our accruals for insurance reserves reflect certain actuarial assumptions and management judgments, which are subject to a high degree of variability. If the number or severity of claims for which we are retaining risk increases, our financial condition and results of operations could be adversely affected. If we lose our ability to self-insure these risks, our insurance costs could materially increase and we may find it difficult to obtain adequate levels of insurance coverage.

The cigarette, tobacco industry isand alternative nicotine industries are subject to a wide range of laws and regulations regarding the marketing, distribution, sale, taxation and use of tobaccotheir products imposed by governmental entities. VariousFor example, various jurisdictions have adopted or are considering legislation and regulations restricting displays and marketing of tobacco and alternative nicotine products, establishing fire safety standards for cigarettes, raising the minimum age to possess or purchase tobacco and alternative nicotine products, requiring the disclosure of ingredients used in the manufacture of tobacco and alternative nicotine products, and imposing restrictions on public smoking restricting the sale of tobacco products directly to consumers or other recipients over the internet and other tobacco product regulation.vaping. In addition, the FDA has been empowered to regulate changes to nicotine yields and the chemicals and flavors used in tobacco and alternative nicotine products (including cigars, pipe and e-cigarette products), require ingredient listings be displayed on tobacco and alternative nicotine products, prohibit the use of certain terms which may attract youth or mislead users as to the risks involved with using tobacco and alternative nicotine products, as well as limit or otherwise impact the marketing of tobacco and alternative nicotine products by requiring additional labels or warnings as well as pre-approvalthat must be pre-approved by the FDA. Such legislation

and related regulation is likely to continue adversely impacting the market for tobacco and alternative nicotine products and, accordingly, our sales of such products. In addition, representatives from the FDA have indicated that new restrictions on the sale of alternative nicotine products could be expected in the near future.

In Canada, manyseveral provinces have enacted legislation authorizing and facilitating the recovery by provincial governments of tobacco-related health care costs from the tobacco industry by way of lawsuit. Some Canadian provincial governments have either already initiated lawsuits or indicated an intention that such lawsuits will be filed. It is unclear at this time how such restrictions and lawsuits may affect Core-Mark and its Canadian operations.

If excise taxes are increased or credit terms are reduced, our sales of cigarettes and other tobacco products could decline and our liquidity could be negatively impacted.

Cigarettes and tobacco products are subject to substantial excise taxes in the U.S. and Canada. Significant increases in cigarette-related taxes and/or fees have been proposed or enacted and are likely to continue to be proposed or enacted by various taxing jurisdictions within the U.S. and Canada as a means of increasing government revenues. These tax increases negatively impact consumption. Additionally, they may cause a shift in sales from premium brands to discount brands, illicit channels or tobacco alternatives, such as electronic cigarettes, as smokers seek lower priced options.

Taxing jurisdictions have the ability to change or rescind credit terms currently extended for the remittance of taxtaxes that we collect on their behalf. If these excise taxes are substantially increased, or credit terms are substantially reduced, it could have a negative impact on our liquidity. Accordingly, we may be required to obtain additional debt financing, which we may not be able to obtain on satisfactory terms or at all.

Our distribution of cigarettes and other tobacco products exposes us to potential liabilities.

In June 1994, the Mississippi attorney general brought an action against various tobacco industry members on behalf of the state to recover state funds paid for health care costs related to tobacco use. Most other states sued the major U.S. cigarette manufacturers based on similar theories. In November 1998, the major U.S. tobacco product manufacturers entered into a Master Settlement Agreement ("MSA"(“MSA”) with 46 states, the District of Columbia and certain U.S. territories. The other four states--Mississippi,states: Mississippi, Florida, Texas and Minnesota (non-MSA states)--settled(“non-MSA states”), settled their litigations with the major cigarette manufacturers by separate agreements. The MSA and the other state settlement agreements settled health care cost recovery actions and monetary claims relating to future conduct arising out of the use of, or exposure to, tobacco products, imposed a stream of future payment obligations on major U.S. cigarette manufacturers and placed significant restrictions on the ability to market and sell cigarettes. The payments required under the MSA result in thehigher pricing of products sold by the participating manufacturers to be priced at higher levels than those sold by non-MSA state manufacturers. In addition, the growth in market share of discount brands since the MSA was signed has had an adverse impact on the total volume of the cigarettes that we sell.

In connection with the MSA, we were indemnified by most of the tobacco product manufacturers from which we purchased cigarettes and other tobacco products, for liabilities arising from our sale of the tobacco products that they supplied to us. Should the MSA ever be invalidated, we could be subject to substantial litigation due to our distribution of cigarettes and other tobacco products, and we may not be indemnified for such costs by the tobacco product manufacturers in the future. In addition, even if we are indemnified by cigarette manufacturers that are parties to the MSA, future litigation awards against such cigarette manufacturers could be so large as to prevent the manufacturers from satisfying their indemnification obligations.

Changes to federal, state or provincial income tax legislation could have a material adverse effect on our business and results of operations.

From time to time, new tax legislation is adopted by the federal government and various states or other regulatory bodies. Significant changes in tax legislation could adversely affect our business or results of operations in a material way.  As tax laws and related regulations change, our financial results could be materially impacted. For example, in the U.S. the federal government has in the past proposed legislation which effectively could limit, or even eliminate, use of the last-in, first-out ("LIFO"(“LIFO”) inventory method for financial and income tax purposes. Although the final outcome of any such proposals cannot be ascertained, the ultimate financial impact to us of the transition from LIFO to another inventory method could be material to our operating results. Given the unpredictability of possible changes and their potential interdependency, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our financial results.

There can be no assurance that we will continue to declare cash dividends in the future or in any particular amounts and if there is a reduction in dividend payments, our stock price may be harmed.

We may not be able to borrow additional capital to provide us with sufficient liquidity and capital resources necessary to meet our future financial obligations.

We expect that our principal sources of funds will be cash generated from our operations and, if necessary, borrowings under a $600$750 million revolving credit facility ("(“Credit Facility"Facility”) as of December 31, 2016. On November 4, 2016, we entered into a ninth amendment to the Credit Facility which increased our Credit Facility from $450 million to $600 million.2018. The Credit Facility, initially dated as of October 12, 2005, as amended or otherwise modified from time to time, is between us, as Borrowers, the Lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Facility expires in May 2020.March 2022. While

Our operating flexibility is limited in significant respects by the restrictive covenants in our Credit Facility.

Our Credit Facility imposes restrictions on us that could increase our vulnerability to general adverse economic and industry conditions by limiting our flexibility in planning for and reacting to changes in our business and industry. Specifically, these restrictions place limits on our ability to, among other things, to: incur additional indebtedness, pay dividends, issue stock of subsidiaries, make investments, repurchase stock, create liens, enter into transactions with affiliates, merge or consolidate, or transfer and sell our assets. In addition, under our Credit Facility, under certain circumstances we are required to meet a fixed charge coverage ratio. Our ability to comply with this covenant may be affected by factors beyond our control and a breach of the covenant could result in an event of default under our Credit Facility, which would permit the lenders to declare all amounts incurred thereunder to be immediately due and payable and to terminate their commitments to make further extensions of credit.

Our actual business and financial results could differ as a result of the accounting methods, estimates and assumptions that we use in preparing our financial statements, which may negatively impact our results of operations and financial condition.

Our headquarters are located in South San Francisco, California, and consist of approximately 31,80025,000 square feet of leased office space. We have entered into a lease for approximately 32,000 square feet of office space in Westlake, Texas, which will become our headquarters on or before July 1, 2019. We also lease approximately 20,000 square feet for use by our information technology and tax personnel in Richmond, British Columbia, approximately 6,000 square feet for use by our information technology personnel in Plano, Texas, and approximately 3,6005,500 and 2,000 square feet of additional office space in Fort Worth, Texas and Phoenix, AZ, respectively. We lease approximately 4.95.1 million square feet and own approximately 0.6 million square feet of distribution space.

We also operate distribution centers on behalf of twoone of our major customers:customers, Couche-Tard: one in Phoenix, Arizona (for Couche-Tard), and one in San Antonio, Texas (for CST Brands, Inc.).Texas. Each facility is leased or owned by the specific customer solelyCouche-Tard for their use and operated by Core-Mark.use.

We are subject to certain legal proceedings, claims, investigations and administrative proceedings in the ordinary course of itsour business. The Company recordsWe record a provision for a liability when it is both probable that the liability has been incurred and that the amount of the liability can be reasonably estimated. These provisions, if any, are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. In the opinion of management, the outcome of pending litigation is not expected to have a material effect on our results of operations, financial condition or liquidity.

Market and Stockholders

Our common stock trades on the NASDAQ Global Market under the symbol “CORE.” According to the records of our transfer agent, we had 1,8031,515 stockholders of record as of February 24, 2017.25, 2019.

Our Business

Core-Mark is one of the largest marketers of fresh and broad-line supply solutions to the convenience retail industry in North America. We offer a full range of products, marketing programs and technology solutions to approximately 43,000 customer locations in the U.S. and Canada. Our customers include traditional convenience stores, drug stores, big box or supercenter stores, grocery stores, liquor stores, and other specialty and small format stores that carry convenience products. Our product offering includes cigarettes, other tobacco products (OTP)(“OTP”), alternative nicotine delivery products, candy, snacks, fast food, groceries, fresh products, dairy, bread, beverages, general merchandise and health and beauty care products. We operate a network of 3032 distribution centers in the U.S. and Canada (excluding two distribution facilities we operate as a third partythird-party logistics provider). Our core business objective is to help our customers increase their sales and profitability.

During 2016,2018, our results from operations benefited from the acquisition of Farner-Bocken in July 2017, and we continued to grow market share and increase our food/non-food sales and gross profit through our core strategiesprimarily by driving our Vendor Consolidation Initiative (VCI), leveraging our “Fresh” product solutions, and providing category management expertise in order to make our customers more relevant and profitable. The aforementioned increase in sales was offset by the decline in cigarette consumption, which decreased at a rate greater than our historical norms during 2018 and adversely impacted our growth in net sales.

Gross profit in 20162018 increased $99.0$75.8 million, or 15.5%9.6%, to $736.9$867.5 million from $637.9$791.7 million in 2015,2017, driven primarily by net market share gains, including the increase in sales. LIFO expense increased $11.3 million in 2016 compared to 2015, due primarily toacquisition of Farner-Bocken, and an increase in the Producer Price Index (PPI) for certain food/non-food product categories. Since we value our inventory in the U.S. on a LIFO basis, our gross profit can be positively or negatively impacted depending on the relative level of price inflation or deflation in manufacturer prices. Gross profit in 2015 included cigarette tax stamp holding gains of $9.0 million and refunds of excise taxes on OTP of $1.8 million relatedsales to prior years.existing customers.

Some of our more recent expansion activities include:

In October 2015,addition, we signed a five-year agreement with Murphy U.S.A. to be the primary wholesale distributor to over 1,400 stores located in 24 states across the Southwest, Southeast and Midwest United States. Services under this contract began in the first quarter of 2016 and have created efficiencies and a strategic supply chain relationship for Murphy U.S.A.

Other Business Developments

As of December 31, 2016,During 2018, we serviced approximately 3,000 Alimentation Couche-Tard, Inc. (Couche-Tard) locations inwere impacted by the U.S. and Canada. A portion of these locations were subject to renewals during the third quarter of 2016. Consequently, our agreement to service approximately 1,100 Circle K stores in the Southeastern Regionloss of the U.S. expired in January 2017. We will continue to service approximately 1,900 stores including both company and franchise operated stores located in the Western and Southwestern regions of the U.S. and Canada. We will also continue to operate a third party distribution center dedicated to supplying over 500 Circlebusiness with K branded convenience stores across Arizona and Nevada.&G, which covered 450 stores.

In January 2017, we announced the expiration of our supply agreement with Kroger Convenience (Kroger) effective April 2017. The expiringexpired agreement coverscovered approximately 680 stores.

In May 2013,August 2017, our Board of Directors authorized a $30$40.0 million increase to our stock repurchase program which(“the Program”), replacing our prior stock repurchase program (“Prior Program”). The timing, price, and volume purchases under the Program are based on market conditions, cash and liquidity requirements, relevant securities laws and other factors. The Program may be discontinued or amended at any time. The program will expireProgram has no expiration date and terminates when the amount authorized has been expended or the Board of Directors withdraws its authorization. In 2016,2018, we repurchased 237,869588,489 shares of common stock atfor a total cost of $15.5 million, or an average price of $37.76 compared to repurchases of 302,366$26.20 per share. In 2017, we repurchased 158,106 shares of common stock atfor a total cost of $4.4 million, or an average price of $30.35 in 2015.$28.11 per share, which includes repurchases under the Prior Program. As of December 31, 2016 and 2015,2018, we had $2.6$22.4 million and $11.5 million, respectively, available for future share repurchases under the program.Program.