REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Core-Mark Holding Company, Inc.:

South San Francisco, California:

We have audited the accompanying consolidated balance sheets of Core-Mark Holding Company, Inc. and subsidiaries (the “Company”) as of December 31, ~~2013~~2016 and ~~2012,~~2015, and the related consolidated statements of operations, comprehensive income, ~~stockholders'~~stockholders’ equity, and cash flows for each of the three years in the period ended December 31, ~~2013.~~2016. Our audits also included the financial statement schedule ~~listed~~ in ~~the Index at~~ Item ~~8(a)(2).~~15. We also have audited the ~~Company's~~Company’s internal control over financial reporting as of December 31, ~~2013,~~2016, based on criteria established in Internal Control-Integrated Framework ~~(1992)~~(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management's Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Pine State Convenience (“Pine State”), which was acquired on June 6, 2016 and whose financial statements constitute approximately 9% of total assets, approximately 4% of total revenue, and approximately 8% of income before income taxes of the consolidated financial statement amounts as of and for the year ended December 31, 2016. Accordingly, our audit did not include the internal control over financial reporting at Pine State. The ~~Company's~~Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying ~~Management's~~Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on the ~~Company's~~Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A ~~company's~~company’s internal control over financial reporting is a process designed by, or under the supervision of, the ~~company's~~company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the ~~company's~~company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A ~~company's~~company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the ~~company's~~company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company and subsidiaries as of December 31, ~~2013~~2016 and ~~2012,~~2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2013,~~2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of

December 31, ~~2013,~~2016, based on the criteria established in Internal Control - Integrated Framework ~~(1992)~~(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ Deloitte & Touche LLP

San Francisco, California

March ~~3, 2014~~1, 2017

~~Table of Contents~~

CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)


	December 31,			December 31,			December 31,
	2013			2012			2016			2015
Assets
Current assets:
Cash and cash equivalents	$	11.0		$	19.1		$	26.4		$	12.5
Restricted cash	12.1			10.9			15.3			8.5
Accounts receivable, net of allowance for doubtful accounts of $9.4 and $10.9
at December 31, 2013 and December 31, 2012, respectively (Note 4)	235.4			228.1
Accounts receivable, net of allowance for doubtful accounts of $7.1 and $10.9
at December 31, 2016 and December 31, 2015, respectively (Note 4)							365.9			272.7
Other receivables, net (Note 4)	59.0			53.8			106.5			69.4
Inventories, net (Note 5)	389.2			366.4			596.6			407.4
Deposits and prepayments (Note 4)	53.0			40.3			82.8			65.0
Deferred income taxes (Note 10)	5.4			8.2			4.7			1.8
Total current assets	765.1			726.8			1,198.2			837.3
Property and equipment, net (Note 6)	114.9			114.7			194.7			159.5
Goodwill (Note 7)	22.9			22.8			36.0			22.9
Other intangible assets, net (Note 7)	20.8			21.4			41.5			29.5
Other non-current assets, net (Note 4)	33.1			33.5			26.6			28.1
Total assets	$	956.8		$	919.2		$	1,497.0		$	1,077.3
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	109.3		$	94.4		$	119.2		$	129.6
Book overdrafts (Note 2)	22.9			24.7			37.9			29.2
Cigarette and tobacco taxes payable	182.5			165.6			259.8			193.6
Accrued liabilities (Note 4)	88.1			79.5			131.8			106.9
Deferred income taxes (Note 10)	3.1			3.4			0.1			0.3
Total current liabilities	405.9			367.6			548.8			459.6
Long-term debt (Note 8)	57.6			84.7			347.7			60.4
Deferred income taxes (Note 10)	13.4			11.7			30.0			18.6
Other long-term liabilities	12.5			12.1			11.5			10.6
Claims liabilities, net (Note 2)	28.2			28.1
Claims liabilities (Note 2)							26.8			26.6
Pension liabilities (Note 11)	5.2			14.8			2.4			7.5
Total liabilities	522.8			519.0			967.2			583.3
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.01 par value (50,000,000 shares authorized, 12,807,015 and
12,602,806 shares issued; 11,518,311 and 11,446,229 shares outstanding at
December 31, 2013 and December 31, 2012, respectively)	0.1			0.1
Stockholders’ equity (Note 14):
Common stock, $0.01 par value (100,000,000 shares authorized, 52,227,511 and
51,953,354 shares issued; 46,152,958 and 46,116,670 shares outstanding at
December 31, 2016 and December 31, 2015, respectively)							0.5			0.5
Additional paid-in capital	254.7			249.2			275.5			271.6
Treasury stock at cost (1,288,704 and 1,156,577 shares of common stock at
December 31, 2013 and December 31, 2012, respectively)	(44.6		)	(37.4		)
Treasury stock at cost (6,074,553 and 5,836,684 shares of common stock at
December 31, 2016 and December 31, 2015, respectively)							(70.7		)	(61.8		)
Retained earnings	229.5			194.9			338.7			300.0
Accumulated other comprehensive loss	(5.7		)	(6.6		)
Accumulated other comprehensive loss (Note 15)							(14.2		)	(16.3		)
Total stockholders’ equity	434.0			400.2			529.8			494.0
Total liabilities and stockholders’ equity	$	956.8		$	919.2		$	1,497.0		$	1,077.3

The accompanying notes are an ~~integral~~integral part of these consolidated financial statements.

~~Table of Contents~~

CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)


	Year Ended December 31,									Year Ended December 31,
	2013			2012			2011			2016			2015			2014
Net sales	$	9,767.6		$	8,892.4		$	8,114.9		$	14,529.4		$	11,069.4		$	10,280.1
Cost of goods sold	9,230.5			8,415.6			7,680.8			13,792.5			10,431.5			9,706.4
Gross profit	537.1			476.8			434.1			736.9			637.9			573.7
Warehousing and distribution expenses	297.1			262.7			234.6			431.2			352.6			318.4
Selling, general and administrative expenses	168.3			153.7			150.8			210.3			196.0			184.4
Amortization of intangible assets	2.7			3.0			3.0			5.3			2.6			2.6
Total operating expenses	468.1			419.4			388.4			646.8			551.2			505.4
Income from operations	69.0			57.4			45.7			90.1			86.7			68.3
Interest expense	(2.7		)	(2.2		)	(2.4		)	(5.3		)	(2.5		)	(2.4		)
Interest income	0.5			0.4			0.4			0.2			0.5			0.6
Foreign currency transaction losses, net	(0.8		)	(0.2		)	(0.5		)
Foreign currency transaction gains (losses), net										0.5			(1.8		)	(0.1		)
Income before income taxes	66.0			55.4			43.2			85.5			82.9			66.4
Provision for income taxes (Note 10)	(24.4		)	(21.5		)	(17.0		)	(31.3		)	(31.4		)	(23.7		)
Net income	$	41.6		$	33.9		$	26.2		$	54.2		$	51.5		$	42.7

Basic net income per common share (Note 12)	$	3.62		$	2.96		$	2.30		$	1.17		$	1.12		$	0.93
Diluted net income per common share (Note 12)	$	3.58		$	2.91		$	2.23		$	1.17		$	1.11		$	0.92

Basic weighted-average shares (Note 12)	11.5			11.5			11.4			46.3			46.2			46.2
Diluted weighted-average shares (Note 12)	11.6			11.6			11.7			46.5			46.6			46.6

Dividends declared and paid per common share	$	0.61		$	0.89		$	0.17

The accompanying notes are an integral part of these consolidated financial statements.

~~Table of Contents~~

CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)


	Year Ended December 31,									Year Ended December 31,
	2013			2012			2011			2016		2015			2014
Net income	$	41.6		$	33.9		$	26.2		$	54.2	$	51.5		$	42.7
Other comprehensive income (loss), net of tax:
Defined benefit plans adjustments (Note 15)	2.4			(2.9		)	(2.7		)
Foreign currency translation adjustment (loss) gain	(1.5		)	0.4			(0.3		)
Other comprehensive (loss) income, net of tax	0.9			(2.5		)	(3.0		)
Defined benefit plan adjustments (Note 15)										0.2		0.2			(2.9		)
Foreign currency translation gain (loss)										1.9		(4.9		)	(3.0		)
Other comprehensive income (loss), net of tax										2.1		(4.7		)	(5.9		)
Comprehensive income	$	42.5		$	31.4		$	23.2		$	56.3	$	46.8		$	36.8

The accompanying notes are an integral part of these consolidated financial statements.

~~Table of Contents~~

CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In millions ⁽¹⁾)


	Common Stock			Additional											Accumulated Other			Total			Common Stock Issued			Additional Paid-in			Treasury Stock					Retained			Accumulated Other Comprehensive			Total Stockholders'
	Issued			Paid-In			Treasury Stock					Retained			Comprehensive			Stockholders'			Shares	Amount		Capital			Shares		Amount			Earnings			(Loss) Income			Equity
	Shares	Amount		Capital			Shares		Amount			Earnings			Income (Loss)			Equity
Balance, December 31, 2010	11.6	$	0.1	$	229.6		(0.5	)	$	(13.2	)	$	147.3		$	(1.1	)	$	362.7
Balance, December 31, 2013																					51.2	$	0.5	$	254.3		(5.2	)	$	(44.6	)	$	229.5		$	(5.7	)	$	434.0
Net income	—	—		—			—		—			26.2			—			26.2			—	—		—			—		—			42.7			—			42.7
Other comprehensive income, net of tax	—	—		—			—		—			—			(3.0		)	(3.0		)
Other comprehensive loss, net of tax																					—	—		—			—		—			—			(5.9		)	(5.9		)
Dividends declared	—	—		—			—		—			(1.9		)	—			(1.9		)	—	—		—			—		—			(10.8		)	—			(10.8		)
Stock-based compensation expense	—	—		5.1			—		—			—			—			5.1			—	—		6.1			—		—			—			—			6.1
Cash proceeds from exercise of
common stock options and warrants	0.7	—		5.4			—		—			—			—			5.4
common stock options																					0.2	—		2.1			—		—			—			—			2.1
Excess tax deductions associated with
stock-based compensation	—	—		1.7			—		—			—			—			1.7			—	—		2.8			—		—			—			—			2.8
Issuance of stock based instruments, net
of shares withheld for employee taxes	0.1	—		(1.7		)	—		—			—			—			(1.7		)
Issuance of stock based instruments, net of
shares withheld for employee taxes																					0.2	—		(1.7		)	—		—			—			—			(1.7		)
Repurchase of common stock	—	—		—			(0.5	)	(19.0		)	—			—			(19.0		)	—	—		—			(0.4	)	(8.0		)	—			—			(8.0		)
Balance, December 31, 2011	12.4	0.1		240.1			(1.0	)	(32.2		)	171.6			(4.1		)	375.5
Balance, December 31, 2014																					51.6	0.5		263.6			(5.6	)	(52.6		)	261.4			(11.6		)	461.3
Net income																					—	—		—			—		—			51.5			—			51.5
Other comprehensive loss, net of tax																					—	—		—			—		—			—			(4.7		)	(4.7		)
Dividends declared																					—	—		—			—		—			(12.9		)	—			(12.9		)
Stock-based compensation expense																					—	—		8.7			—		—			—			—			8.7
Cash proceeds from exercise of
common stock options																					0.2	—		0.4			—		—			—			—			0.4
Excess tax deductions associated with
stock-based compensation																					—	—		2.2			—		—			—			—			2.2
Issuance of stock based instruments, net of
shares withheld for employee taxes																					0.2	—		(3.3		)	—		—			—			—			(3.3		)
Repurchase of common stock																					—	—		—			(0.2	)	(9.2		)	—			—			(9.2		)
Balance, December 31, 2015																					52.0	0.5		271.6			(5.8	)	(61.8		)	300.0			(16.3		)	494.0
Net income	—	—		—			—		—			33.9			—			33.9			—	—		—			—		—			54.2			—			54.2
Other comprehensive income, net of tax	—	—		—			—		—			—			(2.5		)	(2.5		)	—	—		—			—		—			—			2.1			2.1
Dividends declared	—	—		—			—		—			(10.6		)	—			(10.6		)	—	—		—			—		—			(15.5		)	—			(15.5		)
Stock-based compensation expense	—	—		6.2			—		—			—			—			6.2			—	—		6.1			—		—			—			—			6.1
Cash proceeds from exercise of
common stock options	0.1	—		3.8			—		—			—			—			3.8			0.1	—		0.3			—		—			—			—			0.3
Excess tax deductions associated with
stock-based compensation	—	—		1.1			—		—			—			—			1.1			—	—		2.9			—		—			—			—			2.9
Issuance of stock based instruments, net
of shares withheld for employee taxes	0.1	—		(2.0		)	—		—			—			—			(2.0		)
Issuance of stock based instruments, net of
shares withheld for employee taxes																					0.1	—		(5.4		)	—		—			—			—			(5.4		)
Repurchase of common stock		—		—			(0.1	)	(5.2		)	—			—			(5.2		)	—	—		—			(0.2	)	(8.9		)	—			—			(8.9		)
Balance, December 31, 2012	12.6	0.1		249.2			(1.1	)	(37.4		)	194.9			(6.6		)	400.2
Net income	—	—		—			—		—			41.6			—			41.6
Other comprehensive income, net of tax	—	—		—			—		—			—			0.9			0.9
Dividends declared	—	—		—			—		—			(7.0		)	—			(7.0		)
Stock-based compensation expense	—	—		4.6			—		—			—			—			4.6
Cash proceeds from exercise of
common stock options	0.1	—		2.4			—		—			—			—			2.4
Excess tax deductions associated with
stock-based compensation	—	—		2.1			—		—			—			—			2.1
Issuance of stock based instruments, net
of shares withheld for employee taxes	0.1	—		(3.6		)	—		—			—			—			(3.6		)
Repurchase of common stock		—		—			(0.2	)	(7.2		)	—			—			(7.2		)
Balance, December 31, 2013	12.8	$	0.1	$	254.7		(1.3	)	$	(44.6	)	$	229.5		$	(5.7	)	$	434.0
Balance, December 31, 2016																					52.2	$	0.5	$	275.5		(6.0	)	$	(70.7	)	$	338.7		$	(14.2	)	$	529.8


(1)	Amounts have been rounded for presentation purposes and might differ from unrounded results.

The accompanying notes are an integral part of these consolidated financial statements.

~~Table of Contents~~

CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)


	Year Ended December 31,									Year Ended December 31,
	2013			2012			2011			2016			2015			2014
Cash flows from operating activities:
Net income	$	41.6		$	33.9		$	26.2		$	54.2		$	51.5		$	42.7
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
LIFO and inventory provisions	8.7			12.1			18.2			13.2			2.0			16.0
Amortization of debt issuance costs	0.4			0.4			0.5			0.5			0.3			0.3
Stock-based compensation expense	4.6			5.8			5.5			6.1			8.7			6.1
Bad debt expense, net	1.1			2.0			2.0			2.0			1.3			2.2
Depreciation and amortization	27.2			25.3			22.4			42.9			37.9			32.0
Foreign currency transaction losses, net	0.8			0.2			0.5
Foreign currency transaction (gains) losses, net										(0.5		)	1.8			0.1
Deferred income taxes	5.0			0.9			(2.0		)	8.4			8.9			(3.0		)
Curtailment gain	(0.9		)	—			—
Settlement charge										1.3			1.6			—
Changes in operating assets and liabilities:
Accounts receivable, net	(9.6		)	7.1			(20.0		)	(59.2		)	(28.1		)	(13.8		)
Other receivables, net	(5.6		)	(10.6		)	1.9			(37.0		)	(8.9		)	(3.0		)
Inventories, net	(35.4		)	5.3			(78.0		)	(180.4		)	1.5			(50.6		)
Deposits, prepayments and other non-current assets	(18.6		)	3.9			(12.4		)	(19.9		)	(25.9		)	5.7
Excess tax deductions associated with stock-based compensation										(2.9		)	(2.2		)	(2.8		)
Accounts payable	16.0			0.6			30.0			(11.0		)	4.0			20.6
Cigarette and tobacco taxes payable	19.9			(10.3		)	7.5			65.5			13.8			9.1
Pension, claims, accrued and other long-term liabilities	3.9			(5.4		)	9.0			18.8			9.0			4.9
Net cash provided by operating activities	59.1			71.2			11.3
Net cash (used in) provided by operating activities										(98.0		)	77.2			66.5
Cash flows from investing activities:
Acquisition of business, net of cash acquired	(3.6		)	(34.0		)	(50.8		)	(88.4		)	(9.0		)	(1.0		)
Change in restricted cash	(2.0		)	2.0			(0.1		)
Change of restricted cash										(6.8		)	4.5			(0.9		)
Additions to property and equipment, net	(18.0		)	(28.4		)	(24.0		)	(54.3		)	(30.3		)	(53.9		)
Capitalization of software	(0.4		)	(0.2		)	(0.2		)
Capitalization of software and related development costs										(7.7		)	(8.7		)	(5.3		)
Proceeds from sale of property and equipment										—			0.3			—
Net cash used in investing activities	(24.0		)	(60.6		)	(75.1		)	(157.2		)	(43.2		)	(61.1		)
Cash flows from financing activities:
Borrowings (repayments) under revolving credit facility, net	(27.0		)	11.3			62.0
Borrowings under revolving credit facility										1,638.7			936.2			488.3
Repayments under revolving credit facility										(1,349.7		)	(945.1		)	(478.7		)
Payments of financing costs										(2.0		)	(0.4		)	—
Dividends paid	(7.1		)	(10.3		)	(1.9		)	(15.5		)	(12.8		)	(10.7		)
Payments of capital leases	(1.0		)	—			—			(2.4		)	(2.3		)	(1.7		)
Payments of financing costs	(0.3		)	—			(0.7		)
Repurchases of common stock	(7.2		)	(5.2		)	(19.0		)	(8.9		)	(9.2		)	(8.0		)
Proceeds from exercise of common stock options and warrants	2.4			3.8			5.4
Proceeds from exercise of common stock options										0.3			0.4			2.1
Tax withholdings related to net share settlements of restricted stock units	(3.6		)	(2.0		)	(1.7		)	(5.4		)	(3.3		)	(1.7		)
Excess tax deductions associated with stock-based compensation	2.1			1.1			1.7			2.9			2.2			2.8
(Decrease) increase in book overdrafts	(1.8		)	(4.8		)	17.1
Book overdrafts, net										8.7			0.1			6.2
Net cash provided by (used in) financing activities	(43.5		)	(6.1		)	62.9			266.7			(34.2		)	(1.4		)
Effects of changes in foreign exchange rates	0.3			(0.6		)	—			2.4			(1.7		)	(0.6		)
Increase (decrease) in cash and cash equivalents	(8.1		)	3.9			(0.9		)
Change in cash and cash equivalents										13.9			(1.9		)	3.4
Cash and cash equivalents, beginning of period	19.1			15.2			16.1			12.5			14.4			11.0
Cash and cash equivalents, end of period	$	11.0		$	19.1		$	15.2		$	26.4		$	12.5		$	14.4
Supplemental disclosures:
Cash paid during the period for:
Income taxes paid, net of refunds	$	19.5		$	11.7		$	11.8
Income taxes paid, net										$	20.9		$	26.8		$	22.0
Interest paid	1.5			1.6			2.0			$	3.7		$	1.3		$	1.1
Unpaid property and equipment purchases included in accrued liabilities	$	1.9		$	—		$	—		$	2.9		$	5.1		$	1.4
Non-cash capital lease obligations incurred	$	1.2		$	11.4		$	0.4		$	0.1		$	5.4		$	4.7
Non-cash indemnification holdback	$	—		$	4.0		$	—
Contingent consideration related to acquisition of business	$	—		$	0.6		$	—

The accompanying notes are an integral part of these consolidated financial statements.

~~Table of Contents~~

CORE-MARK HOLDING COMPANY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.	Summary of Company Information

Business

Core-Mark Holding Company, Inc. and subsidiaries (referred to herein as ~~“we,” “us,” “our,”~~ “the Company” or “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~~The Company offers a full range of products, marketing programs and technology solutions to ~~over~~ ~~30,000~~approximately 43,000 customer locations in the United States (“U.S.”) and Canada. ~~Our~~The Company’s customers include traditional convenience stores, ~~grocery~~drug stores, ~~drug~~grocery stores, liquor stores and other specialty and small format stores that carry convenience products. ~~Our~~The Company’s product offering includes cigarettes, other tobacco products ("OTP"), candy, snacks, fast food, groceries, fresh products, dairy, bread, beverages, general merchandise and health and beauty care products. ~~We operate~~The Company operates a network of 2830 distribution centers in the U.S. and Canada (excluding two distribution facilities ~~we operate~~it operates as a third party logistics provider). Twenty-five of the Company’s distribution centers are located in the U.S. and five are located in Canada.


2.	Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The consolidated financial statements include Core-Mark and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in the consolidated financial statements. ~~Certain prior year~~

On May 25, 2016, the Board of Directors approved a two-for-one stock split of the Company’s outstanding common stock, effected through a stock dividend. The additional shares were distributed on June 27, 2016 to stockholders of record at the close of business on June 9, 2016. All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been ~~reclassified~~retroactively adjusted to ~~conform~~reflect this two-for-one stock split for all periods presented.

During 2016, the Company identified an error in the presentation of borrowings and repayments of the Company’s revolving credit facility in the previously issued consolidated statements of cash flows. The Company corrected the presentation of borrowings and repayments on the revolving credit facility to reflect them on a gross basis, rather than on a net basis, within the ~~current year’s presentation.~~financing activities section of the consolidated statements of cash flows. The correction did not change previously reported total cash provided by (or used from) financing activities.

Use of Estimates

~~These~~The preparation of financial statements ~~have been prepared on the accrual basis of accounting~~ in accordance with accounting principles generally accepted in the U.S. ~~This~~(“U.S. GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. The Company considers the allowance for doubtful accounts, ~~LIFO valuation,~~vendor rebates and promotional allowances, claims liabilities and insurance recoverables, valuation of ~~goodwill~~pension assets and ~~other~~obligations, valuation of long-lived assets and goodwill, realizability of deferred income taxes and uncertain tax positions ~~pension assets and obligations and self-insurance reserves~~ to be those estimates which involve a higher degree of judgment and complexity. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue at the point at which the product is delivered and title passes to the customer. The Company includes fees charged to customers for shipping and handling activities in net sales and the related costs in cost of goods sold. Revenues are reported net of customer incentives, discounts and returns, including an allowance for estimated returns. The allowance for sales returns is calculated based on the ~~Company's~~Company’s returns experience, which has historically not been significant. The Company also earns management service fee revenue from operating third party distribution centers belonging to certain customers. These revenues represented less than 1% of the Company’s total net sales for ~~2013~~2016, ~~2012~~2015 and ~~2011~~2014. Service fee revenue is recognized as earned on a monthly basis in accordance with the terms of the management service fee contracts and is included in net sales on the accompanying consolidated statements of operations.

Customers’ Sales Incentives

The Company also provides sales allowances or discounts to its customers on a regular basis. These customers’ sales incentives are recorded as a reduction to net sales as the sales incentive is earned by the customer. Additionally, the Company may provide allowances for the customers' commitments to continue using Core-Mark as the supplier. These incentives are known

as racking allowances. These allowances may be paid at the inception of the contract or on a periodic basis. Allowances paid at the inception of the contract are deferred and amortized over the period of the distribution agreement as a reduction to sales.

Vendor Rebates and Promotional Allowances

Periodic payments from vendors in various forms including rebates, promotional allowances and volume discounts, are reflected in the carrying value of the related inventory when earned and in cost of goods sold when the related merchandise is sold. Up-front consideration received from vendors for purchase or other commitments is initially deferred and amortized ratably to cost of goods sold as the performance of the activities specified by the vendor is completed.

Cooperative marketing incentives received from vendors to fund specific programs first offset the costs of the program, and to the extent the consideration exceeds the costs relating to the program, the excess funds are recorded as reductions to cost of goods sold. These amounts are recorded in the period the related promotional or merchandising programs are provided. Certain vendor incentive promotions require the Company to make assumptions and judgments regarding, for example, the likelihood of achieving market share levels or attaining specified levels of purchases. Vendor incentives are at the discretion of the Company’s vendors and can fluctuate due to changes in vendor strategies and market requirements. Vendor rebates and promotional allowances earned totaled $221.2 million, $191.4 million and $162.8 million in 2016, 2015 and 2014, respectively.

Excise Taxes

The Company is responsible for collecting and remitting state, local and provincial excise taxes on cigarette and other tobacco products. These excise taxes are a significant component of the Company’s net sales and cost of goods sold. In 2016, 2015 and 2014, approximately $3.0 billion, $2.2 billion and $2.1 billion, or 21%, 20% and 21% of the Company’s net sales, and approximately 22%, 21% and 22% of its cost of goods sold, respectively, represented excise taxes. Federal excise taxes are levied on the manufacturers who, in turn, pass the tax on to the Company as part of the product cost. As a result, federal excise taxes are not a component of the Company’s excise taxes.

Stock-based Compensation

The Company accounts for stock-based compensation expense related to restricted stock unit ("RSU") awards, performance shares and stock options based on the grant-date fair value of the awards. For service based awards, the Company recognizes the expense using a straight-line method. For performance based awards, the Company recognizes the expense ratably based on the achievement of performance conditions.

Although the Company has not granted stock options since 2011, the Company uses the Black-Scholes option valuation model to determine the fair value of stock option awards (see Note 13 - Stock Incentive Plans). Determining the appropriate fair value model and calculating the fair value of stock option awards at the grant date requires considerable judgment, including estimating stock price volatility, expected life of share awards and forfeiture rates. The Company develops its estimates based on historical data and market information, which can change significantly over time.

Pension and Other Post-retirement Benefit Costs

Pension and other post-retirement benefit costs are estimated 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. The Company offers certain plan participants the option to receive a lump sum payment in lieu of future annuity pension benefits. Acceptance of the lump sum payment by plan participants may result in the Company recognizing a settlement charge and an adjustment in the projected benefit plan obligation.

The Company recognizes an asset for the plan’s overfunded status or a liability for the plan’s underfunded status on its consolidated balance sheet as of the end of each fiscal year. The Company determines the plan’s funded status by measuring its assets and its obligations and recognizes changes in the funded status of its defined benefit post-retirement plan in the year in which the change occurred.

On September 14, 2016, the Board of Directors approved a motion to terminate the Company’s qualified defined-benefit pension plan. The Company expects its pension liabilities will be settled through either lump sum payments or purchased annuities by December 31, 2017 (see Note 11 - Employee Benefit Plans).

Income Taxes

Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax

assets are reduced by a valuation allowance when the Company does not consider it more likely than not that some portion or all of the deferred tax assets will be realized.

A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The Company has established an estimated liability for income tax exposures that arise and meet the criteria for accrual. The Company prepares and files tax returns based on its interpretation of tax laws and regulations and records estimates based on these judgments and interpretations. In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. Inherent uncertainties exist in estimates of tax contingencies due to changes in tax law resulting from legislation, regulation and/or as concluded through the various jurisdictions’ tax court systems. The Company classifies interest and penalties related to income taxes as income tax expense (see Note 10 - Income Taxes).

Earnings Per Share

Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during each period, excluding unvested RSUs and performance shares. Diluted earnings per share is calculated by dividing net income by weighted-average shares outstanding including common stock equivalents. Common stock equivalents include stock options, RSUs and performance based awards if the impact is dilutive, using the treasury stock method (see Note 12 - Earnings Per Share).

Cash, Cash Equivalents, Restricted Cash and Book Overdrafts

Cash and cash equivalents include cash, money market funds and highly liquid investments with original maturities of three months or less. Restricted cash represents funds collected and set aside in trust as required by one of the Canadian provincial taxing authorities to secure amounts payable for cigarette and tobacco excise taxes. The Company had book overdrafts of $37.9 million and $29.2 million at December 31, 2016 and 2015, respectively. Book overdrafts consist primarily of outstanding checks in excess of cash on hand in the corresponding bank accounts at the end of the period. The Company’s policy has been to fund these outstanding checks as they clear with cash held on deposit with other financial institutions or with borrowings under the Company’s revolving credit facility.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consists of trade receivables from customers. The Company evaluates the collectability of accounts receivable and determines the appropriate allowance for doubtful accounts based on historical experience and a review of specific customer accounts. Account balances are charged against the allowance when collection efforts have been exhausted and the receivable is deemed uncollectible (see Note 4 - Other Consolidated Balance Sheet Accounts Detail).

Other Receivables

Other receivables consist primarily of amounts due from vendors for promotional and other incentives, which are accrued as earned. The Company evaluates the collectability of amounts due from vendors and determines the appropriate allowance for doubtful accounts based on historical experience and a review of specific amounts outstanding (see Note 4 - Other Consolidated Balance Sheet Accounts Detail).

Inventories

Inventories consist of finished goods, including cigarettes and other tobacco products, food and other consumable products held for re-sale and are valued at the lower of cost or market. In the Company’s U.S. divisions, cost is determined primarily on a last-in, first-out (“LIFO”) basis. The Company uses the link-chain dollar value LIFO method. The inventory price index computation ("IPIC") is used to calculate LIFO inflation indices for which the LIFO inflation source is the producer price indices ("PPI") published by the US Bureau of Labor Statistics ("BLS"). The Company uses the IPIC pooling method for which LIFO pools are established for each PPI in accordance with current regulations. When the Company is aware of material price increases or decreases from manufacturers, the Company estimates the PPI for the respective period if it determines the price increase is not fully reflected in the PPI in order to more accurately reflect inflation rates. Under the LIFO method, current costs of goods sold are matched against current sales. Inventories in the Company’s Canadian divisions are valued on a first-in, first-out ("FIFO") basis, as LIFO is not a permitted inventory valuation method in Canada. Approximately 82% and 88% of the Company’s inventory was valued on a LIFO basis at December 31, 2016 and 2015, respectively. The Company reduces inventory value for spoiled, aged and unrecoverable inventory based on amounts on-hand and historical experience (see Note 5 - Inventories, Net).

Property and Equipment

Property and equipment are recorded at cost, net of accumulated depreciation and amortization. Depreciation and amortization on new purchases are computed using the straight-line method over the assets’ estimated useful lives. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the property or the term of the lease including available renewal option terms if it is reasonably assured that those options will be exercised. Upon retirement or sale, the cost and related accumulated depreciation of the assets are removed and any related gain or loss is reflected in the consolidated statements of operations. Maintenance and repairs are charged to expense as incurred (see Note 6 - Property and Equipment, Net).

The Company uses the following depreciable lives for its property and equipment:



	Useful Life in Years
Office furniture and equipment	3-10
Delivery equipment	4-10
Warehouse equipment	5-15
Leasehold improvements	3-25
Buildings	15-25

Other Long-lived Assets

Intangible assets with definite lives are generally amortized on a straight-line basis over the following lives:



	Useful Life in Years
Customer relationships	10-15
Non-competition agreements	1-5
Trade names	1-2
Internally developed and other purchased software	3-7

The Company reviews its long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment of long-lived assets exists when the carrying amount of a long-lived asset, or asset group, exceeds its fair value, and impairment losses are recorded when the carrying amount of the impaired asset is not recoverable. Recoverability is determined by comparing the carrying amount of the asset (or asset group) to the undiscounted cash flows which are expected to be generated from its use. The Company has determined that it has five asset groupings based on a review of its assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. During 2016, 2015 and 2014, the Company did not record impairment charges related to long-lived assets (see Note 6 - Property and Equipment, Net and Note 7 - Goodwill and Other Intangible Assets, Net).

Goodwill

Goodwill represents the excess of cost over the fair value of net assets acquired in a business combination. Goodwill is not amortized.

The Company tests goodwill for impairment annually as of October 1 or whenever events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying amount. The Company’s reporting units are its U.S. operations and Canadian operations. Whenever events or circumstances change, the Company assesses the related qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. The tests to evaluate goodwill for impairment are performed at the reporting unit level. In the first step of the quantitative impairment test, the Company compares the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit is less than its carrying value, the Company performs a second step to determine the implied fair value of goodwill associated with the reporting unit. If the carrying value of goodwill exceeds the implied fair value of goodwill, such excess represents the amount of goodwill for which an impairment loss would be recorded. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. The estimated fair value of each reporting unit is based on the discounted cash flow method, which is based on historical and forecasted amounts specific to each reporting unit and considers net sales, gross profit, income from operations and cash flows and general economic and market conditions, as well as the impact of planned business and operational strategies and other estimates and assumptions for future growth rates, working capital and capital expenditures. The Company bases its fair

value estimates on assumptions it believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Measuring the fair value of reporting units constitutes a Level 3 measurement under the fair value hierarchy. There has been no impairment of goodwill for any periods presented (see Note 7 - Goodwill and Other Intangible Assets, Net).

Computer Software Developed or Obtained for Internal Use

The Company accounts for computer software systems, namely SAP Enterprise Resource Planning modules, the Company's proprietary Distribution Center Management System (“DCMS”), and software purchased from third-party vendors, using certain criteria under which costs associated with this software are either expensed or capitalized and amortized over periods from three to seven years. During 2016, 2015 and 2014 the Company capitalized approximately $7.2 million, $9.5 million and $4.4 million, respectively, of costs related to software developed or obtained for internal use (see Note 7 - Goodwill and Other Intangible Assets, Net).

Debt Issuance Costs

Debt issuance costs related to the Company's revolving credit facility ("Credit Facility") are deferred and amortized as interest expense over the term of the related debt agreement on a straight-line basis, which approximates the effective interest method. Debt issuance costs are included in deposits and prepayments and other non-current assets on the accompanying consolidated balance sheets. Total unamortized debt issuance costs were $2.3 million and $1.2 million at December 31, 2016 and 2015, respectively (see Note 8 - Long-term Debt).

Claims Liabilities and Insurance Recoverables

The Company maintains reserves related to health and welfare, workers’ compensation, auto and general liability programs that are principally self-insured. The Company currently has a per-claim deductible of $500,000 for its workers’ compensation, general and auto liability self-insurance programs and a per-person annual claim deductible of $250,000 for its health and welfare program. The Company purchases insurance to cover the claims that exceed the deductible up to policy limits. Self-insured reserves are for pending or future claims that fall outside the policy and reserves include an estimate of expected settlements on pending claims and a provision for claims incurred but not reported. Estimates for workers’ compensation, auto and general liability insurance are based on the Company’s assessment of potential liability using an annual actuarial analysis of available information with respect to pending claims, historical experience and current cost trends. Reserves for claims under these programs are included in accrued liabilities (current portion) and claims liabilities, net of current portion on the accompanying consolidated balance sheets.

Claims liabilities and the related recoverables from insurance carriers for estimated claims in excess of the deductible and other insured events are presented in their gross amounts on the accompanying consolidated balance sheets because there is no right of offset. The carrying values of claims liabilities and insurance recoverables are not discounted. Insurance recoverables are included in other receivables, net and other non-current assets, net. The Company had gross liabilities for health and welfare, workers’ compensation, auto and general liability self-insurance obligations in the amounts of $26.8 million long-term and $13.4 million short-term at December 31, 2016, and $26.6 million long-term and $11.9 million short-term at December 31, 2015. The Company’s liabilities net of insurance recoverables were $13.9 million long-term and $11.3 million short-term at December 31, 2016, and $12.2 million long-term and $10.4 million short-term at December 31, 2015.

Foreign Currency Translation

The operating assets and liabilities of the Company’s Canadian operations, whose functional currency is the Canadian dollar, are translated to U.S. dollars at exchange rates in effect at period-end. Translation gains and losses are recorded in Accumulated Other Comprehensive Income ("AOCI") as a component of stockholders’ equity. Revenue and expenses from Canadian operations are translated using the monthly average exchange rates in effect during the period in which the transactions occur. The Company also recognizes gains or losses on foreign currency exchange transactions between its Canadian and U.S. operations, net of applicable income taxes, in the consolidated statements of operations. The Company currently does not hedge our Canadian foreign currency cash flow.

Total Comprehensive Income

Comprehensive income consists of net income and other transactions recorded directly to stockholders’ equity that are excluded from net income. Other comprehensive income is comprised of defined benefit plan adjustments and foreign currency translation adjustments related to the Company’s foreign operations in Canada, whose functional currency is not the U.S. dollar (see Note 15 - Other Comprehensive Income (Loss)).

Fair Value Measurements

The Company’s financial assets and liabilities are recognized or disclosed at fair value in the financial statements on a recurring basis. The carrying amount of cash equivalents, restricted cash, trade accounts receivable, other receivables, trade accounts payable, cigarette and tobacco taxes payable and other accrued liabilities approximates fair value because of the short maturity of these financial instruments. The carrying amount of the Company’s variable rate debt approximates fair value.

The Company calculates the fair value of certain assets related to acquisitions and cash based pension plan assets using assumptions that market participants would use in pricing these assets (see Note 11 - Employee Benefit Plans). The Company uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and gives precedence to observable inputs in determining fair value. An instrument’s level within the hierarchy is based on the lowest level of any significant input to the fair value measurement. The following levels were established for each input:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Unobservable inputs for the asset or liability, which reflect the Company’s own assumptions about what market participants would assume when pricing the asset or liability.

Business Combinations

The Company accounts for all business combinations using the acquisition method of ~~accounting. Under this method of~~ accounting, ~~the Company~~which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. Management may further adjust the acquisition date fair values for a period of up to one year from the date of acquisition. Acquisition related expenses and transaction costs associated with business combinations are expensed as ~~incurred.~~

~~Vendor Rebates and Promotional Allowances~~

Periodic payments from vendors in various forms including rebates, promotional allowances and volume discounts are reflected in the carrying value of the related inventory when earned and as cost of goods sold as the related merchandise is sold. Up-front consideration received from vendors linked to purchase or other commitments is initially deferred and amortized ratably to cost of goods sold or as the performance of the activities specified by the vendor to earn the fee is completed. Cooperative marketing incentives from suppliers are recorded as reductions to cost of goods sold to the extent the vendor considerations exceed the costs relating to the programs. These amounts are recorded in the period the related promotional or merchandising programs

~~Table of Contents~~

are provided. Certain vendor incentive promotions require the Company to make assumptions and judgments regarding, for example, the likelihood of achieving market share levels or attaining specified levels of purchases. Vendor incentives are at the discretion of the Company’s vendors and can fluctuate due to changes in vendor strategies and market requirements. Vendor rebates and promotional allowances earned totaled incurred (~~$149.8 million~~, ~~$128.0 million~~ ~~and~~ ~~$108.3 million~~ in ~~2013~~, ~~2012~~ ~~and~~ ~~2011, respectively.~~

~~Customers' Sales Incentives~~

The Company also provides sales allowances or discounts to its customers on a regular basis. These customers' sales incentives are recorded as a reduction to net sales as the sales incentive is earned by the customer. Additionally, the Company may provide racking allowances for the customer's commitment to continue using Core-Mark as the supplier of their products. These allowances may be paid at the inception of the contract or on a periodic basis. Allowances paid at the inception of the contract are capitalized and amortized over the period of the distribution agreement as a reduction to sales.

~~Excise Taxes~~

The Company is responsible for collecting and remitting state, local and provincial excise taxes on cigarette and other tobacco products. As such, these excise taxes are a significant component of the Company's net sales and cost of sales. In ~~2013~~, ~~2012~~ ~~and~~ ~~2011, approximately~~ ~~21%~~, ~~22%~~ ~~and~~ ~~24%~~ ~~of the Company's net sales, and approximately~~ ~~22%~~, ~~24%~~ ~~and~~ ~~25%~~ of its cost of goods sold, respectively, represented excise taxes. Federal excise taxes are levied on product manufacturers who, in turn, pass the tax on to the Company as part of the product cost. As a result, federal excise taxes are not a component of the Company’s excise taxes.

~~Foreign Currency Translation~~

The operating assets and liabilities of the Company’s Canadian operations, whose functional currency is the Canadian dollar, are translated to U.S. dollars at exchange rates in effect at period-end. Adjustments resulting from such translation are presented as foreign currency translation adjustments, net of applicable income taxes, and are included in other comprehensive income. The statements of operations, including income and expenses, of the Company’s Canadian operations are translated to U.S. dollars at average exchange rates for the period for financial reporting purposes. The Company also recognizes gains or losses on foreign currency exchange transactions between its Canadian and U.S. operations, net of applicable income taxes, in the consolidated statements of operations.

~~Cash, Cash Equivalents, Restricted Cash and Book Overdrafts~~

Cash and cash equivalents include cash, money market funds and highly liquid investments with original maturities of three months or less. Restricted cash represents funds collected and set aside in trust as required by one of the Canadian provincial taxing authorities. .The Company had cash book overdrafts of ~~$22.9 million~~ ~~and~~ ~~$24.7 million~~ at ~~December 31, 2013~~ ~~and~~ ~~2012~~, respectively. Book overdrafts consist primarily of outstanding checks in excess of cash on hand in the corresponding bank accounts at the end of the period. The Company’s policy has been to fund these outstanding checks as they clear with cash held on deposit with other financial institutions or with borrowings under the Company's line of credit.

~~Fair Value Measurements~~

The carrying amount of cash equivalents, restricted cash, trade accounts receivable, other receivables, trade accounts payable, cigarette and tobacco taxes payable and other accrued liabilities approximates fair value because of the short maturity of these financial instruments. The carrying amount of the Company’s variable rate debt approximates fair value.

The Company calculates the fair value of its pension plan assets based on assumptions that market participants would use in pricing the assets. The Company uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and give precedence to observable inputs in determining fair value. An instrument's level within the hierarchy is based on the lowest level of any significant input to the fair value measurement. The following levels were established for each input:

~~Level 1 - Quoted prices in active markets for identical assets or liabilities.~~

~~Level~~see Note 3 - ~~Unobservable inputs for the asset or liability, which reflect the Company's own assumptions about what market participants would assume when pricing the asset or liability. (See Note 11 - Employee Benefit Plans.~~Acquisition).

~~Table of Contents~~

Risks and Concentrations

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash investments, accounts receivable and other receivables. The Company places its cash and cash equivalents in short-term instruments with high quality financial institutions and limits the amount of credit exposure in any one financial instrument. The Company pursues amounts and incentives due from vendors in the normal course of business and ~~are~~is often allowed to deduct these amounts and incentives from payments made to vendors.

A credit review is completed for new customers and ongoing credit evaluations of each ~~customer's~~customer’s financial condition are performed periodically, with reserves maintained for potential credit losses. Credit limits given to customers are based on a risk assessment of their ability to pay and other factors. Accounts receivable are typically not collateralized, but the Company may require prepayments or other guarantees whenever deemed necessary.

Murphy U.S.A., who the Company began servicing in 2016, is the Company's largest customer and accounted for 12.0% of total net sales in 2016. Alimentation Couche-Tard, Inc. (“Couche-Tard”), the Company’s second largest customer, accounted for ~~14.7%~~11.4%, 14.2% and ~~13.7%~~14.5% of total net sales in ~~2013~~2016, 2015 and ~~2012~~2014, respectively. No ~~single customer accounted for 10% or more of total net sales in~~ ~~2011~~. In addition, no single customer accounted for 10% or more of accounts ~~receivables~~receivable at December 31, ~~2013~~2016 and ~~2012~~2015.

The Company has two significant suppliers: Philip Morris USA, Inc. and R.J. Reynolds Tobacco ~~Company~~.Company. Product purchases from Philip Morris USA, Inc. accounted for approximately ~~28%~~35%, ~~27%~~29% and ~~27%~~ ~~and~~28% of total product purchases in ~~2013~~2016, ~~2012~~2015 and ~~2011~~2014, respectively. Product purchases from R.J. Reynolds Tobacco Company were approximately ~~14%~~23%, 17% and 14% of total product purchases in ~~each of~~ ~~2013~~, ~~2012~~2016, 2015 and ~~2011~~.2014, respectively.

Cigarette sales represented ~~approximately~~71.1%, 68.0%, ~~69.0%~~ and ~~70.4%~~67.5% of net sales in ~~2013~~, ~~2012~~2016, 2015 and ~~2011~~,2014, respectively, and contributed ~~approximately 30.0%~~29.9%, ~~31.7%~~28.3% and ~~31.7%~~27.1% of gross profit in ~~2013~~2016, 2015 and 2014, respectively. The increase in cigarette sales as a percentage of total net sales and gross profit was due primarily to market share gains in 2016, including the addition of Murphy U.S.A., ~~2012~~ ~~and 2011, respectively.~~which has a higher sales mix of tobacco products compared to the rest of our business. Although cigarettes represent a significant portion of the Company’s total net sales, the majority of its gross profit is generated from food/non-food products.

Recent Accounting Standards or Updates Not Yet Effective

On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers: Topic 606 (“ASU 2014-09”), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those

~~Accounts Receivable~~

goods or services. This standard is effective for the Company in the first quarter of 2018. The Company's preliminary assessment supports that financial statement impacts may include: capitalization of successful contract costs, recognition of contract assets and liabilities for certain contracts that are performed but not completed, and the timing of recognition of variable consideration received from vendors and paid to customers. The Company expects to finalize its assessment and approach to adopting ASU 2014-09 on its consolidated financial statements by June 30, 2017.

On November 20, 2015, the FASB issued ASU No.2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes: Topic 740 (“ASU 2015-17”).The new guidance requires entities with a classified balance sheet to present all deferred tax assets and liabilities as non-current. ASU 2015-17 requires eitherprospective or retrospective application and is effective for annual periods beginning after December 15, 2016. The adoption of ASU 2015-17 will not have amaterial impact on the presentation of its consolidated financial statements.

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which supersedes existing lease guidance. The new guidance increases transparency by requiring lessees to recognize right-of-use assets and corresponding lease liabilities on the balance sheet. This standard is effective for annual periods beginning after December 15, 2018, although early adoption is permitted. The Company believes the new standard will have a material impact on its consolidated balance sheets. The Company is currently quantifying the impact and evaluating its approach to adopting ASU 2016-02 on its consolidated financial statements.

On March 30, 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The new guidance simplifies several aspects of how companies account for share-based compensation, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statements of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016. ASU 2016-09 will result in the Company recognizing excess tax benefits or deficiencies in net income instead of being capitalized as additional paid-in capital. We expect such impact to be approximately $1.6 million in 2017.

On June 16, 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The new guidance replaces the current incurred loss impairment approach with a methodology that incorporates all expected credit loss estimates, resulting in more timely recognition of losses. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, although early adoption is permitted. The Company has determined the adoption of ASU 2016-13 will not have a material impact on its consolidated financial statements.

On August 26, 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The new guidance addresses eight specific cash flow presentation and classification issues in the statement of cash flows to reduce existing diversity in practice. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, although early adoption is permitted. The Company has determined the adoption of ASU 2016-15 will not have a material impact on its consolidated financial statements.

On November 17, 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). The new guidance requires the Statements of Cash Flows to reconcile the changes in the total of cash, cash equivalents, and restricted cash. As a result, transfers between cash and cash equivalents, and restricted cash and restricted cash equivalents will no longer be presented in the Statement of Cash Flows. ASU 2016-18 is effective for annual periods beginning after December 15, 2017, although early adoption is permitted. As a result of this pronouncement, the Company expects that it will combine its movements of restricted cash, with those of non-restricted cash and cash equivalents, as reflected in the Company’s Consolidated Statements of Cash Flows.

On January 26, 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The new guidance simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. ASU 2017-04 requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. ASU 2017-04 requires prospective application and is effective for annual periods beginning after December 15, 2019. The Company has determined the adoption of ASU 2017-04 will not have a material impact on its consolidated financial statements.

3. Acquisition

Acquisition of Pine State Convenience

On June 6, 2016, the Company acquired substantially all of the assets of Pine State Convenience ("Pine State"), a division of Pine State Trading Company, located in Gardiner, Maine. The acquisition was accounted for as a business combination in accordance with ASC 805 - Business Combinations. The acquisition increased the Company’s market presence primarily in the Northeastern U.S. and further enhanced the Company’s ability to cost effectively service national and regional retailers. The total

purchase consideration was $88.4 million which was paid at closing and funded through borrowings under the Company's revolving credit facility.

The following table presents the assets acquired and liabilities assumed, based on their fair values and purchase consideration (in millions):



	June 6, 2016
Accounts receivable	$	35.5
Inventories	21.2
Deposits and prepayments, and other	0.9
Property and equipment	10.3
Goodwill	13.1
Other intangible assets	10.2
Less: Accrued liabilities, and other	(2.8		)
Total consideration	$	88.4

The Company determined the estimated fair values of intangible assets acquired with the assistance of independent valuation consultants. The Company finalized its valuation of its beginning goodwill and intangible assets during the fourth quarter ended December 31, 2016. Based on the valuation, intangible assets acquired include the following (in millions):



	Fair Value		Useful Life in Years
Customer relationships	$	7.2	12
Non-competition agreements	1.9		5
Trade names	1.0		2
Favorable lease terms	0.1		2
Total intangible assets	$	10.2

The results of Pine State operations have been included in the Company’s consolidated financial statements since the date of acquisition. The Company incurred $2.2 million of acquisition-related costs, which are included in selling, general and administrative expenses for the year ended December 31, 2016. The Company did not consider the Pine State acquisition to be a material business combination and therefore has not disclosed pro-forma results of operations for the acquired business. Simultaneously with the closing of the acquisition, the Company entered into two operating lease arrangements with certain former owners of Pine State. One operating lease bears a fifteen year term for a facility in Maine and the second operating lease bears a two year term for a facility in Vermont.

Acquisition of Karrys Bros., Limited.

On February 23, 2015, the Company acquired substantially all of the assets of Karrys Bros., Limited (“Karrys Bros.”), a regional convenience wholesaler servicing customers in Ontario, Canada, and the surrounding provinces, for cash consideration of approximately $8.0 million, or $10.0 million (Canadian dollars). Transaction and integration costs in connection with the acquisition of Karrys Bros. were approximately $1.7 million for the year ended December 31, 2015. The Karrys Bros. operations have been integrated into the Company’s existing distribution center in Toronto and have provided the Company with the opportunity to increase its market share in eastern Canada. The results of operations of Karrys Bros. have been included in the Company’s consolidated statements of operations and comprehensive income since the date of acquisition. The Company did not consider the Karrys Bros. acquisition to be a material business combination and therefore has not disclosed pro-forma results of operations for the acquired business.


4.	Other Consolidated Balance Sheet Accounts Detail

Allowance for Doubtful Accounts, Accounts Receivable

~~Accounts receivable consists of trade receivables from customers.~~ The ~~Company evaluates~~changes in the ~~collectability of accounts receivable and determines the appropriate~~ allowance for doubtful accounts based on historical experience and a review of specific customer accounts. Account balances are charged off against the allowance when collection efforts have been exhausted and the receivable is deemed worthless (~~see~~ ~~Note 4 - Other Consolidated Balance Sheet Accounts Detail~~).

~~Other Receivables~~

~~Other receivables consist primarily of amounts~~ due from ~~vendors for promotional and other incentives, which are accrued as earned.~~customers consist of the following (in millions):



	Year Ended December 31,
	2016			2015			2014
Balance, beginning of year	$	10.9		$	10.8		$	9.4
Net additions charged to operations ⁽¹⁾	2.0			1.3			2.2
Less: Write-offs and adjustments	(5.8		)	(1.2		)	(0.8		)
Balance, end of year	$	7.1		$	10.9		$	10.8

(1) The ~~Company evaluates~~net additions to the ~~collectability of amounts due from vendors and determines the appropriate~~ allowance for doubtful accounts ~~based on historical experience~~were recognized in the consolidated statements of operations as a component of the Company’s selling, general and ~~on a review~~administrative expenses.

Other Receivables, Net

Other receivables, net consist of ~~specific~~the following (in millions):



	December 31, 2016		December 31, 2015
Vendor receivables, net	$	90.6	$	59.0
Insurance recoverables, current	2.1		1.5
Other miscellaneous receivables ⁽¹⁾	13.8		8.9
Total other receivables, net	$	106.5	$	69.4

(1) Other miscellaneous receivables include amounts ~~outstanding.~~related primarily to notes receivables, miscellaneous tax receivables, receivables from the Company’s third party logistics customers, and other miscellaneous receivables.

Deposits and Prepayments

Deposits and prepayments consist of the following (in millions):



	December 31, 2016		December 31, 2015
Vendor prepayments	$	44.7	$	34.1
Deposits ⁽¹⁾	8.5		4.7
Prepaid taxes	10.5		10.6
Racking allowances, current	5.7		6.4
Other prepayments ⁽²⁾	13.4		9.2
Total deposits and prepayments	$	82.8	$	65.0

(1) Deposits include amounts related primarily to cigarette stamps and workers’ compensation claims.

(2) Other prepayments include prepayments relating to insurance policies, software licenses, rent and other miscellaneous prepayments.

Other Non-current Assets, Net

Other non-current assets, net of current portion, consist of the following (in millions):



	December 31, 2016		December 31, 2015
Insurance recoverables	$	12.9	$	14.4
Debt issuance costs	1.6		0.9
Insurance deposits	3.4		2.9
Racking allowances, net	5.0		6.5
Other assets	3.7		3.4
Total other non-current assets, net	$	26.6	$	28.1

Accrued Liabilities

Accrued liabilities consist of the following (in millions):



	December 31, 2016		December 31, 2015
Accrued payroll, retirement and other benefits ⁽¹⁾	$	35.7	$	29.9
Claims liabilities, current	13.4		11.9
Accrued customer incentives payable	40.1		20.3
Indirect taxes	6.2		7.3
Vendor advances	10.9		11.0
Other accrued expenses ⁽²⁾	25.5		26.5
Total accrued liabilities	$	131.8	$	106.9

(1) The Company’s accrued payroll, retirement and other benefits include accruals for vacation, bonuses, wages, 401(k) benefit matching and the current portion of pension and post-retirement benefit obligations.

(2) The Company’s other accrued expenses include accruals for goods and services, lease liabilities, construction in process, legal expenses, and other miscellaneous accruals.

5. Inventories, Net

Inventories consist of ~~finished goods, including cigarettes and other tobacco products, food and other products and related consumable products held for re-sale, and are valued at~~ the lower of cost or market. In the U.S., cost is determined primarily on a last-in, first-out (“LIFO”) basis using producer price indices as determined by the Department of Labor, adjusted based on more current information, if necessary. When the Company is aware of material price increases or decreases from manufacturers, the Company estimates the producer price index for the respective period in order to more accurately reflect inflation rates. Under the LIFO method, current costs of goods sold are matched against current sales. Inventories in Canada are valued on a first-in, first-out (“FIFO”) basis, as LIFO is not a permitted inventory valuation method in Canada. Approximately following (in millions):~~86%~~ ~~and~~ ~~87%~~ ~~of the Company's inventory was valued on a LIFO basis at December 31,~~ ~~2013~~ ~~and~~ ~~2012, respectively.~~



	December 31, 2016			December 31, 2015
Inventories at FIFO, net of reserves	$	727.0		$	524.6
Less: LIFO reserve	(130.4		)	(117.2		)
Total inventories at LIFO, net of reserves	$	596.6		$	407.4

During periods of rising prices, the LIFO method of costing inventories generally results in higher current ~~cost of sales~~costs being charged against income while lower costs are retained in inventories. Conversely, during periods of decreasing prices, the LIFO method of costing inventories generally results in lower current costs being charged against income and higher stated inventories. ~~Liquidations of inventory may also result~~If the FIFO method had been used for valuing inventories in the ~~sale of low-cost inventory~~U.S., inventories would have been approximately $130.4 million and ~~a decrease of cost of goods sold.~~$117.2 million higher at December 31, 2016 and 2015, respectively. The Company ~~reduces~~recorded LIFO expense of $13.2 million, $1.9 million and $16.3 million for the years ended December 31, 2016, 2015 and 2014, respectively. The Company had a decrement in certain of its LIFO inventory ~~value for spoiled, aged~~layers of $4.8 million and ~~unrecoverable inventory based on amounts on-hand~~$12.2 million in 2016 and ~~historical experience.~~2015, respectively, which had the effect of reducing its LIFO expense by $0.6 million in 2016 and $0.7 million in 2015.

6. Property and Equipment, Net

Property and equipment ~~are recorded at cost, net~~consist of ~~accumulated depreciation~~the following (in millions):



	December 31, 2016			December 31, 2015
Delivery, warehouse and office equipment⁽¹⁾	$	280.4		$	235.3
Leasehold improvements	68.6			54.4
Land and buildings⁽²⁾	32.0			28.9
Construction in progress	3.0			0.8
	384.0			319.4
Less: Accumulated depreciation and amortization	(189.3		)	(159.9		)
Total property and equipment, net	$	194.7		$	159.5

(1) Includes equipment capital leases of $13.5 million for 2016 and ~~amortization.~~ $13.4 million for 2015.

(2) Includes $4.8 million for a capital lease related to a warehouse facility in both 2016 and 2015.

Depreciation and amortization on new purchases are computed using the straight-line method over the assets' estimated useful lives. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the property or the term of the lease including available renewal option terms if it is reasonably assured that those options will be exercised. Upon retirement or sale,

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~~the cost and~~expenses related ~~accumulated depreciation of the assets are removed and any related gain or loss is reflected in the consolidated statements of operations. Maintenance and repairs are charged~~ to ~~expense as incurred.~~

~~The Company uses the following depreciable lives for its~~ property and ~~equipment:~~equipment were $28.9 million, $26.0 million and $21.5 million for 2016, 2015 and 2014, respectively.



	~~Useful Life~~ ~~in Years~~
~~Office furniture and equipment~~	~~3 to 10~~
~~Delivery equipment~~	~~4 to 10~~
~~Warehouse equipment~~	~~5 to 15~~
~~Leasehold improvements~~	~~3 to 25~~
~~Buildings~~	~~15 to 25~~

~~Impairment of Long-lived~~7. Goodwill and Other Intangible Assets,

The Company reviews its intangible and other long-lived assets for potential impairment at least quarterly. Long-lived and other intangible assets may also be tested for impairment when events and circumstances exist that indicate the carrying amounts of those assets may not be recoverable. Long-lived assets consist primarily of land, buildings, furniture, fixtures and equipment, leasehold improvements and other intangible assets. An impairment of long-lived assets exists when the carrying amount of a long-lived asset, or asset group, exceeds its fair value, and impairment losses are recorded when the carrying amount of the impaired asset is not recoverable. Recoverability is determined by comparing the carrying amount of the asset (or asset group) to the undiscounted cash flows which are expected to be generated from its use. Assets to be disposed of are reported at the lower of carrying amount or fair value less the cost to sell such assets. During ~~2013~~, ~~2012~~ ~~and~~ ~~2011, the Company did not record impairment charges related to long-lived and other intangible assets or assets identified for abandonment as a result of facility closures or facility relocation.~~ Net

Goodwill

Goodwill represents the excess of the purchase consideration of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in acertain business ~~combination. Goodwill is not subject to amortization but must be evaluated for impairment.~~combinations. The ~~Company tests goodwill for impairment annually or whenever events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its~~ carrying amount. Each quarter, or whenever events or circumstances change, the Company assesses the related qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. The tests to evaluate goodwill for impairment are performed at the operating division level. In the first step of the quantitative impairment test, the Company compares the fair value of the operating division to its carrying value. If the fair value of the operating division is less than its carrying value, the Company performs a second step to determine the implied fair value of goodwill associated with the division. If the carrying value of goodwill exceeds the implied fair value of goodwill, such excess represents the amount of goodwill ~~impairment for which an impairment loss would be recorded. Determining the fair value of a reporting unit involves the use of significant estimates~~during 2016 and assumptions. The estimated fair value of each operating division is based on the discounted cash flow method, which is based on historical and forecasted amounts specific to each reporting unit and considers sales, gross profit, operating profit and cash flows and general economic and market conditions,2015 were as well as the impact of planned business and operational strategies and other estimates and assumptions for future growth rates, working capital and capital expenditures. The Company bases its fair value estimates on assumptions it believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Measuring the fair value of reporting units would constitute a Level 3 measurement under the fair value hierarchy (~~see~~ ~~Note 7 - Goodwill and Other Intangible Assets~~).follows (in millions):

~~The Company has historically performed its annual impairment testing of goodwill on November 30 of each year. In 2013, the Company changed the annual impairment testing date from November 30~~to October 1. The Company believes this change, which represents a change in the method of applying an accounting principle, is preferable in the circumstances as it provides additional time for the Company to quantify the fair value of its operating divisions and meet reporting requirements. The change in the annual goodwill impairment testing date is not intended to nor does it delay, accelerate, or avoid an impairment charge. The Company determined that it was impracticable to objectively determine projected cash flows and related valuation estimates that would have been used as of each October 1 for periods prior to October 1, 2013 without the use of hindsight. As such, the Company has prospectively applied the change in the annual impairment testing date from October 1, 2013.



	Year Ended December 31,
	2016		2015
Goodwill, beginning of year	$	22.9	$	22.9
Pine State acquisition	13.1		—
Goodwill, end of year	$	36.0	$	22.9

The Company did not record any impairment charges related to goodwill during the years ended December 31, ~~2013~~, ~~2012~~2016 and ~~2011~~.

~~Computer Software Developed or Obtained for Internal Use~~

The Company accounts for proprietary computer software systems, namely its Distribution Center Management System (“DCMS”), and software purchased from third-party vendors, using certain criteria under which costs associated with this software

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~~are either expensed or capitalized and amortized over periods from~~ ~~three~~ to ~~eight~~ ~~years. During~~ ~~2013~~ ~~and~~ ~~2012~~ ~~the Company capitalized approximately $2.0 million~~ ~~and~~ ~~$0.2 million~~ ~~of costs related to software developed or obtained for internal use.~~

~~Debt Issuance Costs~~2015.

Debt issuance costs are deferred and are amortized as interest expense over the term of the related debt agreement on a straight-line basis, which approximates the effective interest method. Debt issuance costs, net of current portion, are included in other non-current assets on the accompanying consolidated balance sheets. Total unamortized debt issuance costs were ~~$1.4 million~~ ~~and~~ ~~$1.5 million~~ ~~at December 31,~~ ~~2013~~ ~~and~~ ~~2012, respectively.~~

~~Claims Liabilities and Insurance Recoverables~~

The Company maintains reserves related to health and welfare, workers' compensation, auto and general liability programs that are principally self-insured. The Company currently has a per-claim deductible of ~~$500,000~~ ~~for its workers' compensation, general and auto liability self-insurance programs and a per person annual claim deductible of~~ ~~$200,000~~ for its health and welfare program. The Company purchases insurance to cover the claims that exceed the deductible up to policy limits. Self-insured reserves are for pending or future claims that fall outside the policy and reserves include an estimate of expected settlements on pending claims and a provision for claims incurred but not reported. Estimates for workers' compensation, auto and general liability insurance are based on the Company’s assessment of potential liability using an annual actuarial analysis of available information with respect to pending claims, historical experience and current cost trends. Reserves for claims under these programs are included in accrued liabilities (current portion) and claims liabilities, net of current portion.

Claims liabilities and the related recoverables from insurance carriers for estimated claims in excess of the deductible and other insured events are presented in their gross amounts on the accompanying consolidated balance sheets because there is no right of offset. The carrying values of claims liabilities and insurance recoverables are not discounted. Insurance recoverables are included in other receivables, net and other non-current assets, net. The Company had gross liabilities for health and welfare, workers' compensation, auto and general liability self-insurance obligations in the amounts of ~~$28.2 million~~ ~~long-term and~~ ~~$12.9 million~~ ~~short-term at December 31,~~ ~~2013, and~~ ~~$28.1 million~~ ~~long-term and~~ ~~$8.5 million~~ ~~short-term at December 31,~~ ~~2012. The Company’s liabilities net of insurance recoverables were~~ ~~$11.0 million~~ ~~long-term and~~ ~~$7.6 million~~ ~~short-term at December 31, 2013, and~~ ~~$10.5 million~~ ~~long-term and~~ ~~$6.4 million~~ ~~short-term at December 31, 2012.~~

~~Pension Costs and Other Post-retirement Benefit Costs~~

Pension costs and other post-retirement benefit costs charged to operations are estimated 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. Plan changes that materially reducethe expected years of future services of current employees or eliminates for a significant number of employees the accrual of defined benefits for some or all of their future services, result in curtailment gains. A curtailment gain first reduces any net loss previously included in accumulated other comprehensive income (AOCI), and to the extent that such a gain exceeds any net loss included in AOCI, it is recorded as a curtailment gain in our consolidated statement of operations.

The Company recognizes an asset for a plan's overfunded status or a liability for a plan's underfunded status on its consolidated balance sheet as of the end of each fiscal year. The Company determines the plan's funded status by measuring its assets and its obligations and recognizes changes in the funded status of its defined benefit post-retirement plan in the year in which the change occurred (~~see~~ ~~Note 11 - Employee Benefit Plans~~).

~~Income Taxes~~

A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The Company has established an estimated liability for income tax exposures that arise and meet the criteria for accrual. The Company prepares and files tax returns based on its interpretation of tax laws and regulations and records estimates based on these judgments and interpretations. In the normal course of business, the Company's tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. Inherent uncertainties exist in estimates of tax contingencies due to changes in tax law resulting from legislation, regulation and/or as

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~~concluded through the various jurisdictions' tax court systems. The Company classifies interest and penalties related to income taxes as income tax expense (see~~ ~~Note 10 - Income Taxes~~).

~~Stock-Based Compensation~~

The Company accounts for stock-based compensation expense for restricted stock unit awards, performance shares and stock options by estimating the fair values of awards at their grant dates and recognizes these amounts as expense using a straight-line method for awards with vesting based on service and ratably for awards based on performance conditions. The fair value of restricted stock unit awards and performance shares earned is based upon the Company’s stock price on the grant date.

~~For stock option awards, the Company uses the Black-Scholes option valuation model to determine the fair value (see~~ ~~Note 13 - Stock-Based Compensation Plans~~). Determining the appropriate fair value model and calculating the fair value of stock option awards at the grant date requires considerable judgment, including estimating stock price volatility, expected life of share awards and forfeiture rates. The Company develops its estimates based on historical data and market information, which can change significantly over time.

~~Total Comprehensive Income~~

Total comprehensive income consists of two components: net income and other comprehensive income. Other comprehensive income refers to transactions and adjustments that under generally accepted accounting principles are recorded directly as an element of stockholders' equity, but are excluded from net income. Other comprehensive income is comprised of defined benefit plan adjustments and foreign currency translation adjustments related to the Company’s foreign operations in Canada, whose functional currency is not the U.S. dollar (~~see Note 15 - Other Comprehensive Income/Loss).~~

~~Segment Information~~

The Company reports its segment information using established standards for reporting by public enterprises on information about product lines, geographical areas and major customers. The method of determining what information to report is based on the way the Company is organized for operational decisions and assessment of the aggregate financial performance. From the perspective of the Company’s chief operating decision maker, the Company is engaged primarily in the business of distributing packaged consumer products to convenience retail stores in the U.S. and Canada (collectively "North America"). Therefore, the Company has determined that it has ~~one~~ ~~reportable segment and operates its business in~~ ~~two~~ geographical areas -- U.S. and Canada. The Company presents its segment reporting information based on business operations for each of the two geographic areas in which it operates and also by major product category (~~see~~ ~~Note 16 - Segment and Geographic Information~~).

~~Earnings Per Share~~

Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during each period, excluding unvested restricted stock units and performance shares. Diluted earnings per share assumes the exercise of stock options and common stock warrants, the impact of restricted stock units and performance shares, when dilutive, using the treasury stock method (~~see~~ ~~Note 12 - Earnings Per Share~~).

~~Recent Accounting Pronouncements~~

~~On July 18, 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-11,~~ ~~Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists~~, which requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (NOL) carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax asset for that purpose. This accounting standard update will be effective for the Company beginning in the first quarter of 2014 and applied prospectively with early adoption permitted. The Company does not believe that its adoption of this accounting standard will have a material impact on its consolidated financial statements.

~~3. Acquisitions~~

~~Acquisition of J.T. Davenport & Sons, Inc.~~

~~On December 17, 2012, the Company acquired J.T. Davenport & Sons, Inc. (“Davenport~~”), a convenience wholesaler based in North Carolina, which is now a subsidiary of Core-Mark. Davenport services customers in the eight states of North Carolina, South Carolina, Georgia, Maryland, Ohio, Kentucky, West Virginia and Virginia. This acquisition increased the Company’s market presence primarily in the Southeastern U.S. and further enhanced the Company's ability to cost effectively service national and regional retailers.

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~~Total purchase consideration to acquire~~ ~~Davenport~~ was approximately $41.2 million, of which $34.3 million was paid at closing. The total purchase consideration increased by $2.3 million in 2013 resulting from certain post-closing purchase price adjustments. The acquisition was funded with a combination of cash on hand and borrowings under a revolving credit facility and was accounted for as a business combination.

~~The following table presents the fair values of assets acquired and liabilities assumed and purchase consideration as of the acquisition date (in millions).~~

December 17, 2012
Cash $ 0.3
Accounts receivable 21.2
Other receivables 3.9
Inventory 20.3
Prepaid expenses / other assets 2.6
Property, plant and equipment 5.3
Intangible assets 2.6
Goodwill 6.7
Net deferred tax liabilities (1.0 )
Capital lease liability (10.9 )
Other liabilities (9.8 )
Total consideration $ 41.2

~~The total purchase consideration includes (i) a~~ ~~$4.0 million~~ indemnity holdback for any post-closing liabilities to be released, less any indemnity claims, to the former owners of Davenport in equal installments over four years on the anniversary date of the closing of the acquisition; and (ii) ~~$0.6 million~~ ~~of contingent payments related to future employment services. As of~~ ~~December 31, 2013, the Company had~~ ~~$3.0 million~~ ~~and~~ ~~$0.3 million~~ ~~of future payment obligations remaining under the indemnity holdback and employment service provisions, respectively. The intangible assets are comprised of (i) $1.9 million~~ ~~of customer relationships, which is being amortized over~~ 10 ~~years; and (ii) $0.7 million~~ ~~of non-competition agreements, the majority of which is being amortized over~~ ~~five~~ years. The estimated fair value of the purchased intangible assets was determined using the income approach, which discounts expected future cash flows attributable to the specific assets to their present value. The purchase price allocation also includes ~~$1.0 million~~ ~~of net deferred tax liabilities related primarily to the difference between the book and tax bases of the assets acquired.~~

~~The acquisition resulted in $6.7 million~~ of non-amortizing goodwill, which represents the excess of the cash paid over the fair value of net assets acquired and liabilities assumed, net of deferred tax liabilities. The goodwill arising from the acquisition, which is not deductible for tax purpose, reflects synergies the Company expects to realize.

Simultaneous with the closing of the acquisition, the Company entered into a capital lease arrangement for a warehouse facility in Sanford, North Carolina with certain of the former owners of Davenport, who are now employees of Core-Mark. The term of the lease is for 10 ~~years, excluding renewal options, and the related capital lease obligation was~~ ~~$10.4 million~~ at ~~December 31, 2013~~.

~~Results of operations of Davenport have been included in the Company’s statements of operations and comprehensive income since the date of acquisition. The Company incurred costs of approximately~~ ~~$1.6 million~~ ~~and~~ ~~$1.3 million~~ related primarily to the acquisition and integration of Davenport’s operations in 2013 and 2012, respectively. These costs are included in selling, general and administrative expenses on the consolidated statements of operations for the years ended ~~December 31, 2013~~ ~~and~~ ~~2012~~.

~~The Company did not consider the Davenport acquisition to be a material business combination and therefore has not disclosed pro-forma results of operations for the acquired business.~~

~~Acquisition of Forrest City Grocery Company~~

On ~~May 2, 2011, the Company acquired Forrest City Grocery Company (“FCGC”), located in Forrest City, Arkansas, and thereafter~~ ~~FCGC~~ ~~became a subsidiary of Core-Mark.~~ ~~FCGC~~ ~~was a regional wholesale distributor servicing customers in Arkansas, Mississippi, Tennessee and the surrounding states. The acquisition of~~ ~~FCGC~~ ~~provided the Company additional distribution infrastructure and increased its market share in the Southeastern U.S.~~

~~Table of Contents~~

~~The total consideration to acquire FCGC was approximately~~ ~~$54.0 million, which was funded with a combination of cash on hand and borrowings under the Company's revolving credit facility. The acquisition was accounted for as a business combination.~~

The following table summarizes the allocation of the consideration paid for the acquisition and the estimated fair values of assets acquired and liabilities assumed as of the acquisition date (in millions):

May 2, 2011
Cash $ 3.5
Accounts receivable 18.4
Other receivables 0.4
Inventory 13.0
Prepaid expenses / other assets 2.0
Property, plant and equipment 6.0
Intangible assets 18.4
Goodwill 11.6
Net deferred tax liabilities (7.0 )
Other liabilities (12.3 )
Total consideration $ 54.0

~~The total purchase consideration included an escrow reserve of approximately $17.0 million~~ ~~for indemnifiable claims in connection with the acquisition. The amount of the escrow reserve decreased to $13.5 million~~ ~~as of~~ ~~December 31, 2013~~ due primarily to scheduled payments to the seller under the escrow agreement and reimbursements to the Company for pre-acquisition tax liabilities settled during the year. The remaining escrow reserve, subject to adjustment, is available for claims through May 2015.

~~The acquired intangible assets include $16.4 million~~ ~~of customer relationships, which is being amortized over~~ 15 ~~years; and $2.0 million~~ of non-competition agreements, the majority of which is being amortized over 5 years. The estimated fair value of the intangible assets was determined using the income approach, which discounts expected future cash flows to present value. The purchase price allocation also includes $~~7.0 million~~ ~~of net deferred tax liabilities related primarily to the difference between the book and tax bases of the intangible assets. The acquisition resulted in $11.6 million~~ ~~of non-amortizing goodwill, which is not deductible for tax purposes.~~

Results of operations of FCGC have been included in the Company’s consolidated statements of operations and comprehensive income since the date of acquisition. The Company did not consider the FCGC acquisition to be a material business combination, and therefore has not disclosed pro-forma results of operations for the acquired business.


4.	~~Other Consolidated Balance Sheet Accounts Detail~~

~~Allowance for Doubtful Accounts, Accounts Receivable~~

~~The changes in the allowance for doubtful accounts due from customers consist of the following (in millions):~~

2013 2012 2011
Balance, beginning of year $ 10.9
$ 9.6
$ 8.7
Net additions charged to operations 1.1
2.0
2.0
Less: Write-offs and adjustments (2.6 ) (0.7 ) (1.1 )
Balance, end of year $ 9.4
$ 10.9
$ 9.6

~~The net additions to the allowance for doubtful accounts were recognized in the consolidated statements of operations as a component of the Company’s selling, general and administrative expenses.~~

~~Table of Contents~~

~~Other Receivables, Net~~

~~Other receivables, net consist of the following (in millions):~~

December 31, 2013 December 31, 2012
Vendor receivables, net $ 46.0
$ 41.2
Insurance recoverables, current 5.3
2.2
Other 7.7
10.4
Total other receivables, net $ 59.0
$ 53.8

~~Deposits and Prepayments~~

~~Deposits and prepayments consist of the following (in millions):~~

December 31, 2013 December 31, 2012
Deposits $ 4.9
$ 4.8
Prepaid income taxes 4.3
3.7
Vendor prepayments 26.4
18.8
Racking allowances, current 7.9
5.0
Other prepayments 9.5
8.0
Total deposits and prepayments $ 53.0
$ 40.3

Deposits include amounts related primarily to cigarette stamps and workers' compensation claims. Other prepayments include prepayments relating to insurance policies, rent, cigarette stamps and software licenses.

~~Other Non-Current Assets, Net~~

~~Other non-current assets, net of current portion, consist of the following (in millions):~~

December 31, 2013 December 31, 2012
Insurance recoverables $ 17.2
$ 17.6
Debt issuance costs 1.1
1.0
Insurance deposits 3.7
3.6
Racking allowances, net 4.9
4.4
Other assets 6.2
6.9
Total other non-current assets, net $ 33.1
$ 33.5

~~Table of Contents~~

~~Accrued Liabilities~~

~~Accrued liabilities consist of the following (in millions):~~

December 31, 2013 December 31, 2012
Accrued payroll, retirement and other benefits $ 25.8
$ 27.7
Claims liabilities, current 12.9
8.5
Accrued customer incentives payable 18.5
14.9
Indirect taxes 5.9
5.2
Vendor advances 5.3
5.5
Other accrued expenses 19.7
17.7
Total accrued liabilities $ 88.1
$ 79.5

The Company’s accrued payroll, retirement and other benefits include accruals for vacation, bonuses, wages, 401(k) benefit matching and the current portion of pension and post-retirement benefit obligations. The Company’s other accrued expenses include accruals for goods and services, legal expenses, interest and other miscellaneous accruals.

~~5. Inventories~~

~~Inventories consist of the following (in millions):~~

December 31, 2013 December 31, 2012
Inventories at FIFO, net of reserves $ 488.2
$ 456.7
Less: LIFO reserve (99.0 ) (90.3 )
Total inventories at LIFO, net of reserves $ 389.2
$ 366.4

Cost of goods sold reflects the application of the last-in, first-out (“LIFO”) method of valuing inventories in the U.S. based upon estimated annual producer price indices. Inventories in Canada are valued on a first-in, first-out (“FIFO”) basis, as LIFO is not a permitted inventory valuation method in Canada. If the FIFO method had been used for valuing inventories in the U.S., inventories would have been approximately ~~$99.0 million~~ ~~and $90.3 million higher at~~ ~~December 31, 2013~~ ~~and~~ ~~2012, respectively. The Company had a decrement in certain of its LIFO inventory layers of~~ ~~$11.8 million~~, ~~$23.2 million~~ ~~and~~ ~~$2.4 million~~ ~~in 2013, 2012 and 2011, respectively, which had the effect of reducing its LIFO expense by~~ ~~$2.2 million~~ ~~in 2013,~~ ~~$1.6 million~~ ~~in 2012 and~~ ~~$0.6 million~~ ~~in 2011. The Company recorded LIFO expense of~~ ~~$8.7 million, $12.3 million and $18.3 million for the~~ ~~years ended December 31,2013~~, ~~2012~~ ~~and~~ ~~2011, respectively. The decrement in the Company’s LIFO inventory layers in 2013 was due primarily to lower inventory levels resulting from higher than expected sales in December 2013. Approximately~~ ~~$20.0 million~~ ~~of the~~ ~~$23.2 million~~ ~~decrement in 2012 was the result of a reduction in LIFO layers created in 2011, due to a temporary increase in inventory to support new business and holiday timing at the end of 2011.~~

~~6. Property and Equipment~~

~~Property and equipment consist of the following (in millions):~~

December 31, 2013 December 31, 2012
Delivery, warehouse and office equipment⁽¹⁾
$ 169.0
$ 156.2
Leasehold improvements 36.1
32.3
Land and buildings⁽²⁾
26.9
24.9
Construction in progress 1.1
1.4
233.1
214.8
Less: Accumulated depreciation and amortization (118.2 ) (100.1 )
Total property and equipment, net $ 114.9
$ 114.7

~~(1) Includes equipment capital leases of $3.3 million for 2013 and~~ ~~$2.1 million~~ ~~for~~ ~~2012~~.

~~(2) In both 2013 and 2012 includes~~ ~~$4.8 million~~ ~~for a capital lease related to a warehouse facility.~~

~~Table of Contents~~

~~Depreciation and amortization expenses related to property and equipment were~~ ~~$20.0 million~~, ~~$18.5 million~~ ~~and~~ ~~$16.2 million~~ ~~for~~ ~~2013~~, ~~2012~~ ~~and~~ ~~2011, respectively. Property and equipment includes accruals for construction in progress of~~ ~~$1.9 million~~ in ~~2013~~ ~~and~~ ~~$0.2 million~~ in ~~2012~~.

~~7. Goodwill and~~ Other Intangible Assets,

~~Goodwill~~

~~The changes in the carrying amount of goodwill during~~ ~~2013~~ ~~and~~ ~~2012~~ ~~are as follows (in millions):~~

2013 2012
Goodwill, beginning of year $ 22.8
$ 16.2
Davenport acquisition 0.1
6.6
Goodwill, end of year $ 22.9
$ 22.8

The Company tests goodwill for impairment annually or whenever events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying amount. The Company did not record any impairment charges related to goodwill during the years ended ~~December 31, 2013~~, ~~2012~~ ~~and~~ ~~2011~~. Net

~~Other Intangible Assets~~

The carrying amount and accumulated amortization of other intangible assets as of December 31, ~~2013~~2016 and ~~2012~~2015 are as follows (in millions):


	December 31, 2013							December 31, 2012							December 31, 2016							December 31, 2015
	Gross					Net		Gross					Net		Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount		Amount		Amortization			Amount		Amount		Amortization			Amount
Customer relationships	$	21.1	$	(4.1	)	$	17.0	$	21.6	$	(3.0	)	$	18.6	$	28.3	$	(9.4	)	$	18.9	$	21.1	$	(7.3	)	$	13.8
Non-competition agreements	3.2		(1.8		)	1.4		3.2		(1.0		)	2.2		5.0		(3.1		)	1.9		3.2		(2.9		)	0.3
Trade names															1.0		(0.3		)	0.7		—		—			—
Favorable lease terms															0.1		—			0.1		—		—			—
Internally developed and other purchased software	11.9		(9.5		)	2.4		9.9		(9.3		)	0.6		33.0		(13.1		)	19.9		25.8		(10.4		)	15.4
Total other intangible assets	$	36.2	$	(15.4	)	$	20.8	$	34.7	$	(13.3	)	$	21.4	$	67.4	$	(25.9	)	$	41.5	$	50.1	$	(20.6	)	$	29.5

The amortization of intangible assets ~~inclusive of non-compete agreements, customer lists and internally developed and other purchased software,~~ recorded in the consolidated statements of operations was $$5.3 million for 2016, and ~~2.7~~$2.6 million infor both ~~2013~~2015 and ~~$3.0 million~~ ~~in both~~ ~~2012~~ ~~and~~ ~~2011~~2014.

~~Intangible assets and software with definite useful lives are amortized over the following useful lives:~~



	~~Useful Life in Years~~
~~Customer relationships~~	~~10-15~~
~~Non-competition agreements~~	~~1-5~~
~~Software~~	~~3-8~~

Estimated future amortization expense for intangible assets is as follows (in millions):


Year ending December 31,
2014	$	2.5
2015	2.4
2016	2.1
2017	1.9		$	6.5
2018	1.8		5.9
2019			5.6
2020			5.5
2021			5.1
2022 and thereafter			12.9
Total			$	41.5



Delaware	20-1489747
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

395 Oyster Point Boulevard, Suite 415 South San Francisco, California 94080	(650) 589-9445
(Address of Principal Executive Offices, including Zip Code)	(Registrant's Telephone Number, including Area Code)



Title of each class	Name of each exchange on which registered
Common Stock, par value $0.01 per share	NASDAQ Global Market



Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o



		Page
PART I
ITEM 1.	BUSINESS	1

ITEM ~~1.A.~~1A.	RISK FACTORS	109

ITEM ~~1.B.~~1B.	UNRESOLVED STAFF COMMENTS	1615

ITEM 2.	PROPERTIES	1615

ITEM 3.	LEGAL PROCEEDINGS	17

ITEM 4.	MINE SAFETY DISCLOSURES	17

PART II

ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	18

ITEM 6.	SELECTED FINANCIAL DATA	21

ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23

ITEM ~~7.A.~~7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4246

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	4347

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	7984

ITEM ~~9.A.~~9A.	CONTROLS AND PROCEDURES	7984

ITEM ~~9.B.~~9B.	OTHER INFORMATION	7984

PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	8085

ITEM 11.	EXECUTIVE COMPENSATION	8085

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	8085

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	8085

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	8085

PART IV

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	8186



	Year Ended December 31,
	2016				2015				2014
Product Category	Net Sales		% of Net Sales		Net Sales		% of Net Sales		Net Sales		% of Net Sales
Cigarettes	$	10,335.7	71.1	%	$	7,528.5	68.0	%	$	6,942.0	67.5	%
Food ⁽¹⁾	1,422.5		9.8		1,251.1		11.3		1,180.9		11.5
Fresh ⁽¹⁾	389.8		2.7		335.0		3.0		281.1		2.7
Candy	620.0		4.3		557.0		5.0		534.3		5.2
Other tobacco products ("OTP")	1,133.8		7.8		870.3		8.0		827.5		8.1
Health, beauty & general	446.7		3.1		368.8		3.3		361.0		3.5
Beverages	176.5		1.2		156.6		1.4		151.8		1.5
Equipment/other	4.4		—		2.1		—		1.5		—
Total food/non-food products	4,193.7		28.9	%	3,540.9		32.0	%	3,338.1		32.5	%
Total net sales	$	14,529.4	100.0	%	$	11,069.4	100.0	%	$	10,280.1	100.0	%


x	Annual Report Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934


o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


(1)	Adjusted EBITDA is a non-GAAP measure. See reconciliation of Adjusted EBITDA to net income in Item 7- Adjusted EBITDA.


(1)	In 2016, the Fresh category was separated from the Food category to better highlight the growth in the Fresh commodity. The 2015 and 2014 presentations have been realigned to reflect these changes.


	U.S.	Canada	Total	U.S.	Canada	Total
Sales and Marketing	1,256	65	1,321	1,465	108	1,573
Warehousing and Distribution	3,255	297	3,552	4,766	367	5,133
Management, Administration, Finance and Purchasing	628	116	744	834	148	982
Total Categories	5,139	478	5,617	7,065	623	7,688



Distribution Center Facilities by City and State of Location⁽¹⁾
Albuquerque, New Mexico	Hayward, California	Spokane, Washington
Atlanta, Georgia	Las Vegas, Nevada	Tampa, Florida
~~Atlanta, Georgia~~Bakersfield, California	Leitchfield, Kentucky	Whitinsville, Massachusetts
~~Bakersfield, California~~	~~Los Angeles, California~~	~~Wilkes-Barre, Pennsylvania~~
Corona, California⁽²⁾	~~Minneapolis, Minnesota~~Los Angeles, California	~~Calgary, Alberta~~Wilkes-Barre, Pennsylvania
Denver, Colorado	~~Portland, Oregon~~Minneapolis, Minnesota	~~Toronto, Ontario~~⁽⁵⁾ Calgary, Alberta
Forrest City, Arkansas⁽⁴⁾⁽³⁾	Portland, Oregon	Toronto, Ontario
Fort Worth, Texas	Sacramento, California⁽³⁾⁽⁴⁾	Vancouver, British Columbia
~~Fort Worth, Texas~~Gardiner, Maine	Salt Lake City, Utah	Winnipeg, Manitoba
~~Grants Pass, Oregon~~Glenwillow, Ohio	Sanford, North Carolina
~~Hayward, California~~	~~Spokane, Washington~~	Mississauga, Ontario⁽⁵⁾


(2)	This location includes two facilities, a distribution center and our AMI consolidating warehouse.


(3)	This facility includes a distribution center and our ~~Artic Cascade~~AMI-Artic East consolidating warehouse.


(5)	This facility ~~includes a distribution center and~~is our Canadian ~~Consolidation operations~~consolidating warehouse.



	Low Price		High Price
Fiscal 2013
4th Quarter	$	63.86	$	75.93
3rd Quarter	62.65		67.26
2nd Quarter	50.26		63.75
1st Quarter	46.09		51.72

	Low Price		High Price
Fiscal 2012
4th Quarter	$	40.06	$	49.24
3rd Quarter	43.29		50.56
2nd Quarter	34.78		48.17
1st Quarter	37.01		42.74



	Market Prices								Dividend Declared
	2016				2015				Year
	Low Price		High Price		Low Price		High Price		2016		2015
4th Quarter	$	33.24	$	43.46	$	32.22	$	45.30	$	0.09	$	0.08
3rd Quarter	35.16		48.96		29.48		33.26		0.08		0.07
2nd Quarter	38.26		46.86		26.31		32.72		0.08		0.07
1st Quarter	35.99		41.60		29.26		35.68		0.08		0.07



	Investment Value at
	12/31/08		12/31/09		12/31/10		12/31/11		12/31/12		12/31/13
CORE	$	100.00	$	153.16	$	165.38	$	184.91	$	225.58	$	365.05
Russell 2000	$	100.00	$	127.09	$	161.17	$	154.44	$	179.75	$	249.53
NASDAQ Index	$	100.00	$	150.81	$	178.60	$	178.37	$	209.06	$	292.89
Performance Peer Group	$	100.00	$	126.37	$	139.15	$	143.29	$	162.50	$	197.84



	Investment Value at
	12/31/11		12/31/12		12/31/13		12/31/14		12/31/15		12/31/16
CORE	$	100.00	$	121.99	$	197.47	$	325.76	$	434.86	$	460.97
Russell 2000	$	100.00	$	116.35	$	161.52	$	169.42	$	161.95	$	196.45
NASDAQ Non-financial Index	$	100.00	$	117.21	$	164.20	$	188.95	$	202.50	$	217.97
S&P SmallCap 600	$	100.00	$	116.33	$	164.38	$	173.84	$	170.41	$	215.67
Performance Peer Group	$	100.00	$	113.63	$	139.22	$	154.28	$	150.40	$	205.50



						Approximate
				Total Cost		Dollar Value
				of Shares		of Shares that
				Purchased as		May Yet be
	Total			Part of Publicly		Purchased Under
	Number	Average		Announced Plans		the Plans
Calendar month	of Shares	Price Paid		or Programs		or Programs
in which purchases were made:	Repurchased	per Share⁽¹⁾		(in millions)		(in millions)

October 1, 2013 to October 31, 2013	—	$	—	$	—	$	30.1
November 1, 2013 to November 30, 2013	—	—		—		30.1
December 1, 2013 to December 31, 2013	20,232	72.34		1.4		28.7
Total repurchases for the three months ended December 31, 2013	20,232	$	72.34	$	1.4	$	28.7



Calendar Month in which purchases were made:	Total Number of Shares Repurchased	Average Price Paid per Share⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in millions)
October 1, 2016 to October 31, 2016	49,743	$	34.91	49,743	$	2.6
November 1, 2016 to November 30, 2016	—	—		—	—
December 1, 2016 to December 31, 2016	—	—		—	—
Total repurchases for the three months ended December 31, 2016	49,743	$	34.91	49,743	$	2.6


	Core-Mark Holding Company, Inc.										Core-Mark Holding Company, Inc.
			Year Ended December 31,								Year Ended December 31,
(in millions except per share amounts)	2013^(a)(b)		2012^(a)(b)		2011^(b)		2010^(c)		2009^(d)		2016⁽¹⁾			2015⁽²⁾		2014		2013		2012⁽³⁾
Statement of Operations Data:
Net sales	$	9,767.6	$	8,892.4	$	8,114.9	$	7,266.8	$	6,531.6	$	14,529.4		$	11,069.4	$	10,280.1	$	9,767.6	$	8,892.4
Gross profit ^(e)(4)	537.1		476.8		434.1		385.3		401.6		736.9			637.9		573.7		537.1		476.8
Warehousing and distribution expenses ^(e)(4)	297.1		262.7		234.6		211.8		197.3		431.2			352.6		318.4		297.1		262.7
Selling, general and administrative expenses	168.3		153.7		150.8		142.5		137.3		210.3			196.0		184.4		168.3		153.7
Amortization of intangible assets	2.7		3.0		3.0		2.1		2.0		5.3			2.6		2.6		2.7		3.0
Income from operations	69.0		57.4		45.7		28.9		65.0		90.1			86.7		68.3		69.0		57.4
Interest expense, net ^(f)(5)	2.2		1.8		2.0		2.2		1.4		5.1			2.0		1.8		2.2		1.8
Foreign currency transaction (gains) losses											(0.5		)	1.8		0.1		0.8		0.2
Net income	41.6		33.9		26.2		17.7		47.3		54.2			51.5		42.7		41.6		33.9
Per share data:
Basic net income per common share	$	3.62	$	2.96	$	2.30	$	1.64	$	4.53
Diluted net income per common share	$	3.58	$	2.91	$	2.23	$	1.55	$	4.35
Shares used to compute net income per share:
Basic	11.5		11.5		11.4		10.8		10.5
Diluted	11.6		11.6		11.7		11.4		10.9
Per Share Data:
Basic net income per common share ⁽⁶⁾											$	1.17		$	1.12	$	0.93	$	0.91	$	0.74
Diluted net income per common share ⁽⁶⁾											$	1.17		$	1.11	$	0.92	$	0.90	$	0.73
Shares Used to Compute Net Income Per Share:
Basic ⁽⁶⁾											46.3			46.2		46.2		46.0		46.0
Diluted ⁽⁶⁾											46.5			46.6		46.6		46.4		46.4
Cash Dividends Declared Per Common Share ⁽⁷⁾											$	0.33		$	0.29	$	0.23	$	0.15	$	0.23
Other Financial Data:
Excise taxes ^(g)	$	2,050.8	$	1,987.0	$	1,951.5	$	1,756.5	$	1,516.0
Cigarette inventory holding gains/FET ^(h)	9.0		7.8		8.2		6.1		25.2
OTP tax items ⁽ⁱ⁾	—		—		0.8		0.6		0.6
LIFO expense	8.7		12.3		18.3		16.6		6.7
Depreciation and amortization ^(j)	27.2		25.3		22.4		19.7		18.7
Excise taxes ⁽⁸⁾											$	3,022.0		$	2,211.7	$	2,110.3	$	2,050.8	$	1,987.0
Cigarette inventory holding gains ⁽⁹⁾											15.3			10.1		8.2		9.0		7.8
Candy inventory holding gains ⁽¹⁰⁾											—			—		6.0		—		—
Cigarette tax stamp inventory holding gains, net ⁽¹¹⁾											—			8.5		—		—		—
OTP tax items, net ⁽¹²⁾											—			1.7		7.5		—		—
LIFO expense ⁽¹³⁾											13.2			1.9		16.3		8.7		12.3
Depreciation and amortization ⁽¹⁴⁾											42.9			37.9		32.0		27.2		25.3
Stock-based compensation	4.6		5.8		5.5		4.8		5.1		6.1			8.7		6.1		4.6		5.8
Capital expenditures	18.0		28.6		24.1		13.9		21.1
Adjusted EBITDA^(k)	109.5		100.8		91.9		70.0		95.5
Capital expenditures ⁽¹⁵⁾											54.3			30.3		53.9		18.0		28.6
Adjusted EBITDA(non-GAAP)⁽¹⁶⁾											152.3			135.2		122.7		109.5		100.8

			December 31,								December 31,
	2013		2012		2011		2010		2009		2016			2015		2014		2013		2012
Balance Sheet Data:
Total assets	$	956.8	$	919.2	$	870.2	$	708.8	$	677.9	$	1,497.0		$	1,077.3	$	1,029.6	$	956.8	$	919.2
Total debt, including current maturities^(l)	58.8		85.6		63.3		1.0		20.0
Long-term obligations ⁽¹⁷⁾											347.7			60.4		68.2		57.6		84.7


(a) (1)	~~The~~Pine State Convenience was acquired in June 2016 and the results of operations have been included in the selected consolidated financial data ~~includes~~since the ~~results~~date of ~~operations of J.T. Davenport & Sons, Inc., which was acquired on December 17, 2012.~~the acquisition.


~~(b)~~(2)	~~The~~Karrys Bros., Limited was acquired in February 2015 and the results of operations have been included in the selected consolidated financial data ~~includes~~since the ~~results~~date of ~~operations of FCGC, which was acquired in May 2011, and~~ the ~~Tampa, Florida division, which commenced operations in September 2011.~~acquisition.


~~(d)~~	The selected consolidated financial data includes approximately $534.0 million of incremental sales related to increased cigarette prices by manufacturers in response to the increase in federal excise taxes mandated by the SCHIP legislation and $36.7 million of related cigarette inventory holding gains, offset by $11.5 million of net floor stock tax.from that point forward.


~~(e)~~(4)	Gross profit may not be comparable to those of other entities because warehousing and distribution expenses are not included as a component of our cost of goods sold.


~~(f)~~(5)	Interest expense, net, is reported net of interest income.


(7)	On October 19, 2011, we announced the commencement of a quarterly dividend program. In lieu of the first quarter 2013 dividend, the Board of Directors declared an accelerated cash dividend of $0.05 per common share on December 20, 2012.


(8)	State, local and provincial excise taxes (predominantly cigarettes and tobacco) paid by ~~the Company~~us are included in net sales and cost of goods sold.


~~(j)~~(12)	In 2015, we received OTP tax refunds of $1.8 million related to prior years’ taxes, offset by $0.1 million related expenses. In 2014, we received OTP tax refunds of $9.0 million related to prior years’ taxes, offset by $1.0 million of related expenses and a probable OTP tax assessment of $0.5 million. OTP tax settlements were zero for 2013 and 2012.


(13)	The decrease in LIFO expense in 2015 was due primarily to a decrease in the Producer Price Index ("PPI") for certain product categories we use to measure food/non-food LIFO expense as published by the Bureau of Labor Statistics.


(14)	Depreciation and amortization includes depreciation on property and equipment and amortization of purchased ~~intangibles.~~intangible assets.


~~(l)~~(16)	The following table provides the components of Adjusted EBITDA for each year presented (in millions):


(17)	Includes ~~debt~~amounts borrowed and long-term capital lease obligations.


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



Declaration Date	Dividends Per Share	Record Date	Cash Payment Amount ⁽¹⁾	Payment Date
February 24, 2016	$0.08	March 11, 2016	$3.8	March 28, 2016
May 9, 2016	$0.08	May 25, 2016	$3.7	June 15, 2016
August 8, 2016	$0.08	August 24, 2016	$3.8	September 15, 2016
November 4, 2016	$0.09	November 23, 2016	$4.2	December 15, 2016


(1)	Amounts and percentages have been rounded for presentation purposes and might differ from unrounded results.


(2)	See the reconciliation of net sales less excise taxes to net sales in "Comparison of Sales and Gross Profit by Product Category" and in "Non-GAAP Financial Information".


(4)	Income from operations for 2016 includes LIFO expense of $13.2 million compared to $1.9 million in 2015. In addition, income from operations in 2015 includes cigarette tax stamp inventory holding gains in the U.S. of $8.5 million, net of expenses, resulting from the increase in the excise tax rates of certain jurisdictions.