Good morning everyone and thank you for joining us today. We would like to welcome you to Core-Mark Holding Company's Fourth Quarter Earnings Conference Call. You are all in a listen-only mode until we open up the call for as many questions as time permits. This call is scheduled to last 60 minutes. We ask that you limit yourself to one question and one follow-up question so that others can get an opportunity to have their questions addressed. (Operator Instructions) At this time, I would like to turn the call over to Ms. Milton Gray Draper, Director of Investor Relations; please go ahead.

Thank you operator and welcome everyone I would now like to read a statement about the use of forward-looking statements and non-GAAP financial measures during this call. Statements made in the course of this call that state the company's or management's hopes, beliefs, expectations or predictions of the future are forward-looking statements. Actual results may differ materially from those projections. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our SEC filings including our Form 10-K, our 10-Qs, and our press releases. We undertake no obligation to update these forward-looking statements. We are holding this call to review our fourth quarter results and to answer any questions you might have. If you have additional follow-up questions after the call, please call me at 650-589-9445. Joining me today is the Chief Executive Officer of Core-Mark, Michael Walsh; and the Chief Financial Officer, Stacy Loretz-Congdon. Also in the room is Chris Miller, our Chief Accounting Officer, and Greg Antholzner, our Vice President of Finance and Treasurer. Our lineup for the call today is as follows. Michael Walsh will discuss the state of our business and our strategy going forward, followed by Stacy Loretz-Congdon, who will review the financial results for the fourth quarter. We will then open up the call for your questions. Now, I would like to turn the call over to our CEO, Mike Walsh.

Our sales increased 8.7%, our EBIT increased 32%, later Stacy will cast a more refined perspective. As a reminder, my comments are always on FIFO basis. But those are the numbers that represent the headline. While the economic downturn began in the fourth quarter of 2007, for the year, our sales increased again 8.7% and our EBIT was down 19.1%, not due to weakening performance of this year but primarily due to the one-time tax gain of $13.3 million last year. Adjusting for these tax refunds holding gains and LIFO expense our EBIT was up 20.8% for the year. These results were achieved despite the fact that the industry continues to experience cigarette carton decline. For the year our same-store carton sales for the US and Canada combined dropped approximately 3.4% while we understand the industry dropped about 4% in the US. In the fourth quarter, our total company same-store sales cartons declined nine-tenth of 1%. You may recall we regained some of the loss Imperial Tobacco volume in 2008 which allowed Canada to show an actual increase in same-store carton volume. Now contrast this to the drop in carton volume to the improvements in our profits, effectively we absorbed the loss in cigarette profit dollars and generated improvement in our EBIT. We achieved this result through a focused plan successfully implemented in 2008 which enabled us to shift the loss carton profitability to primarily the non-cigarette category. And as I have stated over the past two to three years the entire industry must and will affect this shift. The good news is that according to our long range forecast models this shift can occur in an orderly fashion without resulting in the convenience channel becoming price disadvantage for the non-cigarette products sold in comparison to other channels. On the…

Thanks, Mike and good morning to everyone. I would first like to echo Mike's sentiments that we feel we had a good year and made substantial progress point of view of hurdles including fuel costs, carton declines and economic crisis that is terminating our daily life. As a company, we have traditionally viewed ourselves as a recession-resistant, partly due to the consumable nature of the convenience product resale. In light of this instability in the financial market, however, I suspect that many of you are concerned about what that means to us. Specifically, the questions we are getting seem to pivot around the same theme. Creditworthiness of our AR portfolio, our capital allocations philosophy and under funded status of our frozen pension plan. In addition, we expect you are wondering what the recently past SCHIP will due to our working capital needs, so I will address this towards the end of my comments. First as Mike mentioned, we continue to carefully monitor our accounts receivable portfolio and we have stepped our communication internally with all of our credit professionals in the field. I want to remind all of you that our cash cycle is short, just over 9 days on average. We have a low tolerance for payment delays and have increased our response to slow payers through alternate credit terms, which include COD or no shift status. Our total past due status over 30 days was 2.6% at the end of 2008 compared to 3% at the end of 2007. This excludes the AR balances related to the two customers we posted significant results during 2007 and we are still pursuing aggressively. We are doing every reasonable thing we know to protect ourselves and minimize our credit exposure. Second, we continue to maintain our conservative capital allocations philosophy. Consistent…

Thank you. (Operator Instructions) Our first question comes from Jonathan Lichter from Sidoti. Please go ahead. Jonathan Lichter - Sidoti & Company: Hi, good morning.

Good morning. Jonathan Lichter - Sidoti & Company: So your estimate for working capital for SCHIP is $30 million to $40 million additional?

Yes. Jonathan Lichter - Sidoti & Company: Okay. Why were the non-cigarette margins this high, is it all related to Fresh initiative?

No, not all. I would say we had some higher than normal price increases on non-cigarette items that also helped us for the increased margins. So I wouldn't say these kind of pressures are 100% responsible for it. Jonathan Lichter - Sidoti & Company: And those should be sustainable, I imagine then?

Well, Jonathan it hits us. Those things happen pretty regularly, you just can't tell when or how much. But in the 20 years I have been here, they have been pretty consistently. Jonathan Lichter - Sidoti & Company: Okay. And then just lastly Canadian sales then were down entirely because of the currency, is that correct?

There was a significant impact of the result of the currency. For the fourth quarter it was $48 million. Jonathan Lichter - Sidoti & Company: Okay, thank you.

Our next question comes from James Ray from Hawkshaw Capital. Please go ahead.

Yes. I was just wondering if you could provide an update on the VCI revenues similar to what you have provided last quarter.

This rough of the year, we are, I would say, about $80 million for the year of 2008, which was under what we had hope to achieve largely because of our milk contract to sell-through. We are planning to do a 100, again this year.

Okay. And for Fresh total?

Yeah. I am talking about VCI and Fresh as one category.

Okay. That's all. Thank you.

Welcome.

Our next question comes from Garrett Stevens from Giovine Capital. Please go ahead.

Yeah. Hi, thanks for taking question.

Sure.

Expand a bit on your thoughts around your capital plan, Mike? I think we can understand kind of shielding buyback to some degree though, I think it's really nice to see enough activity there to offset any potential option dilution, but why can't we move forward a bit more forcefully with the dividend at this point? It seems like that only consumed about $4 million of the capital for the [22%] dividend and that seems relatively modest in light of the cash that you got to be drawing off this year.

Okay, got it. Garrett I think the thought here is that given the volatility of the markets, we want to keep our powder dry. If you just look at what we forecast and we can see, things look pretty solid, but we don't know what we don't know. And not many companies are jumping out there and adding dividends today, a lot of companies are rolling back their share buyback programs that have had them. And I think it's really due to just trying to take a conservative posture in a time where the markets are very volatile and sort of unpredictable. I think the company will address this again when all of us see a little more stability return back to the markets. And I think most companies are taking that position.

Absolutely, it just seems like $4 million isn't that much relative to the cash flow that you should you know hopefully see this year. So I think in light of your comments is it safe to assume that we shouldn't expect the dividend to put in place in the near future?

Yeah, we are having a hard time hearing you, can you speak up?

You tailed off a little bit, Garrett.

Yeah, sure. Just kind of based on your comments then is it safe to assume that you won't be putting a dividend in the very near future?

We do not have plans to put in the dividend right now, so I would say in the very near future, that's right we don't have plans. I think it's fair to say that we are monitoring the market and the stability of credit and everything else that's going on out there. And I think when we get comforted that there is some stability that we can rely on. I think that we manage and then the board we will then again begin to address these kinds of options.

What sort of stability would you want to see?

Well, actually it's hard to measure. I think you will know it when you see it. But to define exactly what it is, I don't think we have sat down and constructed a formula. But I think when you see some liquidity returning to the financial markets, when bank start to loan again, when our customers get small businesses, get access to capital, I think all of these indicators, I think we will all kind of know it when we see it.

Okay. Thank you very much.

You are welcome.

Our next question comes from Ian Wallace from Third Point. Please go ahead.

Hi, guys.

Hi, Ian.

Hey, how are you?

Good, sir.

With respect to the working capital increase due to SCHIP, is $30 million to $40 million that's net increase or is?

That's a net increase, because remember this is an excise tax embedded in the product value from the manufactures, and the majority of our manufacturers are COD or prepay. And I think, our guesstimate is somewhere in the neighborhood of 18 days working capital days.

Okay. And we will see that for $30 million to $40 million hit in the second quarter?

Well, as we mentioned, the manufacturers have already announced increases and those are being ruled out primarily before April 1, so we definitely will see the impact, probably going, you may see it in the first quarter numbers actually. And good chunk of it anyway.

And then, with respect to using capital, when you look at, you probably do not have the answer, anyway, but when you look at the acquisitions the company has made over the last couple of years, and you look at EBITDA contribution from those, how does the multiple on those compared to the company's aggregate valuation?

I would say very favorably, both of those acquisitions have exceeded our pro forma projections. And we are very happy with the performance of those, and I think they did very well with the overall company. I will say, I think, the team here did an excellent job in doing their homework and in negotiating those deals. And that gives me confidence that we are not bad at this. And we are acquisitive and we are looking for opportunities that will result in the same outcomes the two that we had in the last couple of years.

Okay. Can you kind of give a sense of what the total capital committed on those was and what the EBITDA contribution?

No, I will, pardon me.

We don’t break out each division contribution to the EBITDA. I would say that, the asset investment we have disclosed in our financial statements, so you can definitely look at that. But I will reiterate that we do not break out the individual division EBITDA contribution.

Okay, thank you.

. : John Colive - Oppenheimer & Company: Good morning.

Good morning.

Good morning. John Colive - Oppenheimer & Company: I had two questions, coming directly from the K. The first and you surely touched on this earlier was the bad debt expense, and that you are watching credit carefully. I noticed that additions were $1.6 million but the write-off was $2.1 million. I was just wondering if perhaps you can help me understand why the addition to the allowance was so low given the write-off.

I am trying to put in context of what you are looking at, so $1.6 million was primarily for accounts that we had reserved for in prior year. And we took those into; you are probably looking at the valuation table I am thinking. John Colive - Oppenheimer & Company: Right.

The bad debt expense actually went to the P&L and then two would be just a normal recurring provision that we satisfied. Our provision is based on a specific identification and now it's a certain large accounts that go over terms and as I mentioned we have experienced a slight decline in our over term statistics. So, it seems somewhat replacement to me more of a turn in the portfolio. John Colive - Oppenheimer & Company: Yes, I was just wondering if you are using a specific case basis, I guess that would explain the difference.

Yes, it’s based on specific identification that we have a small general reserve for accounts under a $1000. John Colive - Oppenheimer & Company: Okay. And then I guess, you mentioned earlier in comments about the Candy Q3 purchase over Q4 that it was accelerated I think, if I heard that correct?

Well, I think I have mentioned in other calls that it's really difficult to breakout Candy increases from our normal recurring merchandise income that we earned because we trade load when there is an opportunity which foregoes the regular merchandise income that we would earn on the normal recurring purchases. John Colive - Oppenheimer & Company: Okay. Then, my next question was why was drop in vendor incentives receivable. And I guess that would explain it then.

Yes, just timing of the purchasing. John Colive - Oppenheimer & Company: Great, thanks very much.

Thank you.

Our next question comes from John Hardy from Principal Global. Please go ahead.

Yes, good morning, I had a question on your Canadian operations and looking at the segment results, you went from a loss of $1 million to $5.6 million this year. I am assuming biggest chunk of that was the foreign currency hit but its still looks like you probably would have had a little bit larger loss. I wonder if you could discuss what's going on there and how you are fairing and attempting to gain new customers and increase throughput through your facilities up there.

Right, okay. One of the issues is, Toronto we open a new division, in Toronto January 21, of last year. That was an investment we made in the Ontario marketplace because that’s where most of the people in Canada are located, we have been in Western Canada for a number of year's. We entered into a contract with a key customer, up there that sort of gave us a critical mass to consider putting an operation up there. And because of that we incurred some losses but our hope is that with our presence there we can, and will penetrate the market and our guys are doing that, I mean, never as fast as you want but we have had some gains that give me hope and some excitement that we are going to be fine in Toronto. But if you compare one year to the other it did add to the losses. The other area that I talk about was Calgary. Calgary struggled again in 2008 for the most part. But two favorable things are going on Calgary. First of all, their results are getting better, but primarily due to one, the employment situation in Alberta is easing somewhat. There was a very severe labor shortage that's been going on for a year and half to two years. Big oil shale is up there and it was sucking up all of the available labor. That is easing somewhat with the price of oil nationally dropping. I think it's now below the economic value by which they can process the sands. And that's having an effect on our turnover which is having a positive effect on our operating costs. The other thing also I believe having an effect is we have a brand new management team up there that we put into place. End of last year we, last year we had a lot of corporate support in there to analyze and evaluate what we needed to do and we put in place a what we believe is an excellent management team and they are already showing improvements to that operations. It's large marketplace. Our revenues are very robust up there. It's just a matter of getting our operating costs to process those sales efficiently. I do believe that we are, we had a few months down where, if shown that are on the right track there. So I believe that Canada will show a nice turn around in 2009 for those reasons.

You will be picking up additional volumes in the Ontario market and cost coming under better control in Calgary?

That it’s to summarize that's exactly right.

In terms of the Ontario operation, mean when you first went in did you think it was going to be like maybe a three to four year time frame before you had sufficient volumes to, break into the back or earn an acceptable return on investment. And has that changed at all, whatever the time frame was?

I would say yes to the first question when you open up a distribution center its all you are going to take it two or three years to really to get all the volume that you need. But having said that I would say that the revenues were certainly softer than we anticipated in 2008 and I would like to get into, to why that is but the revenues were certainly softer. But towards the end of the, we were really just focused on setting up an operation that we could deliver the product in a reliable way. We did not even start pursuing additional revenues until mid summer I would say and that had some positive results and as we thought there would be. So little weaker start than I had anticipated, but signs that long-term, we are in the right position.

Are there opportunities in the acquisition area to accelerate throughput through that Ontario facility?

Yes.

Alright thank you.

You're welcome.

Our next question comes from [Andrew Volt] from BB&T Capital Markets. Please go ahead. Andrew Volt - BB&T Capital Markets: Thank you. Mike, earlier in your prepared remarks I think you talked about consolidation possibilities and I think you said they might be accelerating their more apparent. Was that due were you saying that was more due to SCHIP and sort of financial side, I mean for you guys it’s a big number and I imagine for a smaller wholesaler especially in a shrinking credit environment or is it more the economy and can SCHIP affect on demand. So more on the balance sheet side or more the income statement cash flow side, it might be?

I think it’s the balance sheet. I think as well as both. It’s SCHIP is going to put more pressure on people, looking for financing and as we all know that's problematic these days. So that's a reason that we think that there might be an acceleration of the opportunities to acquire people and certainly and I think probably even more important that SCHIP as the price goes up the demand we think is going to go down. Now I do not think that most of the distributors that are out there have a strategy have a plan or can effect one that will counter the inevitable decline in carton consumption that is a very, very powerful long-term phenomenon that's going to drive more people to say what is our future and what is our exit strategy. I do think it will accelerate our acquisition opportunities out there and we do plan to be there and do that intelligently when it happens. Andrew Volt - BB&T Capital Markets: And in terms of Core-Mark, you mentioned that everybody has to sort of pass through pricing of some sort in non-cigarettes down the supply chain on to the store to the customer.

Right. Andrew Volt - BB&T Capital Markets: So, that sounds like an industry phenomenon. I guess you are saying that Core-Mark has obviously with Fresh and VCI and other things. Is it more of that, more of a merchandizing thing that Core-Mark would have, or is it more a scale thing that you might share with someone like [McClain] or is it some combination of that?

Well, let me break it into two parts. We have consciously said, we have to make up for the declining carton consumption affect on our profits by shifting prices to non-cigarettes, and not VCI and Fresh. We are saying that that has to stand by itself. And I guess with my comments, I was saying that we had a very focused effort throughout the company to do just that in 2008, and we were very successful in doing it. So I am seeing SCHIP and the continued decline of carton consumption, and I am knocking on wood that so far I believe that we have sort of the focus and methods and the approach to get that extra money, or not extra money, to replace that money in non-cigarette pricing. But the second thing that you raised that we don't try to confuse with the first one, and that's VCI and Fresh. VCI and Fresh is our mechanism to differentiate ourselves in the marketplace and to grow our profits. The former is to keep our profits, hold, the latter is to grow our profits, and we are trying not to mix one with the other. And I believe, that both have been very effective. We are growing our non-cigarette margins by about 20 basis points, and we have been doing that for the last couple of years. And you got to cleanup the noises in there. But, largely, it is because we are getting better margins on this Fresh stuff and that's helping to add this 20 basis points, and I see that continuing. And we are holding our profits on cigarettes. I think we are going to be holding that, because as long as the manufacturers can. I appreciate what Philip Morris and others have done in the way they have handled this price increase. It has enabled us and other distributors, to be candid, to kind of weather this initial tax hits we are going to have to our inventory. But overall, the way the manufacturers have done that, it should not be harmful to us. It will, of course, result in declining carton consumption. But, I think, we have really two excellent strategies in place to counter that. I am not so sure. In fact, I would be fairly sure that many of our competitors do not have that strategy. Maybe, a couple of the bigger ones would. I would say most of them do not. And I think that's going to lead to some acquisition opportunities for us. Andrew Volt - BB&T Capital Markets: Thank you. I appreciate that.

Welcome.

Our next question comes from Peter Black from Wynnefield Capital. Please go ahead.

Hi, Michael, Stacy and Milton, how are you doing?

Peter, well how are you?

Great, thank you.

Good, thanks. Yeah, almost all my questions were answered. Just one follow-up on SCHIP legislation, do you have any fear that consumers are going into stores and continue to buy cigarette? They will now have less money left over to shop the other parts of the stores and actually you might eventually see a small erosion in the comp store sales of non-cigarette products too?

Yes, yeah to some extent, but let me just give you perspective. First of all gas is a very powerful attractor. And people are still, that's what my comments about the effect of the economy. I tend to look at that as what effect is that going to have on traffic, but people are going to these convenient stores in large measure, because they are getting their gas. And with gas prices being down, that's been very helpful to us on that. But let me give you an example. Look at what's happened in Canada over the years. You are seeing this acceleration of carton prices in the US, but in Canada, the premium brands up there, retailers selling for $80 to $90 a carton. And frankly our cigarette business up there has been okay. So I don't know that even this SCHIP is going to have draconian effects that you would expect. So I don't think it's overall. That's not something I worry a lot about. And is really up to us and the retailer to have a better offering in (Inaudible) almost down, so you can raise your hands about this economy (inaudible) home, but really this says, smart operators people that are going to offer the consumer a better value, a better higher quality product and all that, they are going to continue to get the business and the retailers I talk to they are doing good, they are fairly happy.

Okay. Great, and so your intention now is I guess to see how the quarter progresses and wait and see how the SCHIP legislation filters through and then if need be change your guidance, but right now you are sticking with the sales target you gave.

Right, we said, this is what we see, that’s the best number we can see today and I have given you the gross affect that would have on our cartons, but I think that’s mostly going to be offset by the decline whatever that decline is. And we will monitor that and if we get a hand I am looking at Stacy, but if we get a handle on that I think we would adjust our guidance accordingly, right?

Definitely, and I think we just need to wait for the carton volume to stabilize a little probably be a little bit choppy going in.

Right, okay. Alright, thanks very much, I appreciate it.

You're welcome.

Our next question comes from [Brian Duran] from MFC Global. Please go ahead.

Hi guys, how are you?

Fine, Brian.

I have another working capital question, $30 million to $40 million clearly is a material amount and my math making some assumptions that should take up most of your free cash flow after CapEx next year and if you assume, you are managing to every capital decision is managed to a required return hurdle, that means that when you come up with $6 million to $8 million or down about pre-tax from a profit perspective to make up for that increase capital you use. And I guess I just wanted to be clear as most of that from what you are suggesting going to come from the pricing initiatives on the non-cigarette portion of your business. Is that the way to think about that?

Yes, I think that is the primary mechanism. However, we will still be looking at price remedies on remaining cigarettes and we will be hopefully adding to our penny profit, post the tax.

Yes, I would agree. I think that with the cash discount as it currently fits absent to me future developments and we do anticipate that there will be some upside on the penny profit that will help subsidize that, but to the extent we are losing gross profit dollar overall in the cigarette category. We will be looking for ways to make that up.

I think, lets talk about the VCI and Fresh, we have been investing if you will for the two or three years. And we are getting to a point where most of that investment will be in place and will, we will establish that capability approval. Correspondingly, we will be leveraging the return on this as we continue to grow sales of VCI and Fresh and then you would say, what's happened in between, or how are you taking the account of that. And I would say absolutely, this is the ability that we have developed has lead to market share wins that in my mind more than replaces satisfies return on capital. Now we are starting to kick in the incremental sales of VCI in Fresh that have higher margins and that plus the additional market share wins that we are getting because we are the fresh supplier to the convenience retail industry and certainly gives us return on investment that we have plan. So and as far as what we are doing differently, we are still going to pursue the strategy of VCI and Fresh. We are still pursuing the strategy of expanding our infrastructure into the east where more stores and people are located. So I do not think we have fundamentally changed our strategy based on this working capital increase required by SCHIP. We do plan to get the profit that is required to cover that and to get a return on that.

Well that was my question not a fundamental change in strategy but --

Okay.

In terms of where that incremental profit is going to come from and what you are suggesting Mike it primarily is going to come from the pricing initiatives?

Right.

Across the board.

Right

The last question I have was on CapEx the $27 million guidance how much of that is growth CapEx for the year that should go away by next year?

Well if I can and Stacy you can correct me if I am wrong but I tend to look at in three buckets. Our $27 million that is I would say $14 million is probably in the neighborhood, is the approximate number for maintenance replacing fork lifts and jacks and worn-out compressors and things like that. There is probably another $6 million of growth initiatives. We have expanded some of our facilities last year at [Wax], Bayers and that sort of things and we will continue to do that. And the third component this year was the replacement of a building in Las Vegas. Las Vegas we have a lease facility there and we incorporated in our plans at the end of last year a new division in Las Vegas because our landlord wanted to devote that property to a higher and better use. Now we are still, that was our plan. We are still looking at the situation in Las Vegas in terms of the economy and as we all know it's somewhat depressed. I think the people of Vegas would probably say it’s depressed relative to the recession.

Right.

So, we are definitely maintaining dialogues and maintaining our options, but I am very much aware about the free cash flow formula and what the capital can do. And I am very, very sensitive about spending additional amounts, particularly during these times where the economy is not so strong. \ I am very much aware of that. But all I can tell you is that $27 million did include a new division for Las Vegas, and we are working real hard to see what our options are that maybe an alternative to spending an extra $7 million. We are not there yet, but if we do get there I suspect, Stacy we will be changing our guidance, right?

Yes.

If something.

When we…

Something different happens there, so we are working on that.

Okay, thanks. Well, hopefully the stock won't stay at 18 for too long. But if it does, it's a heck of buy, and heck of use of capital for you guys as well.

Thank you. And we feel exactly the same.

Yeah, thanks.

I am showing no further question at this time.

All right. Thank you, operator. If anyone has any follow-up questions, don't hesitate to give me a call at 650-589-9445. Thanks for your interest in Cork-Mark.

Thank you, ladies and gentlemen. This concludes today's teleconference. Thank you for participating. You may now disconnect.