Good morning. We would like to welcome you to Core-Mark Holding Company's third quarter earnings call. (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.

Welcome, everyone. I would now like to now 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 third 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. Our line-up 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 third quarter. We will then open up the call for your questions. Now, I would like to turn the call over to our CEO, Michael Walsh.

Good morning. A lot has happened since our last call. The investment world is to say the least, going through turmoil that is unparalleled in recent history. Like many companies, Core-Mark stock price has, as we all know, been pummeled to unreasonable levels. I do not view these levels as reflective of the value of our company, now or in the foreseeable future. It seems to be however a reflection of the need for investors in general, to accumulate cash. I do tend to believe the vision of the economy put forth by some, that we have begun a recession that will last through 2009. If so, what does this mean for Core-Mark? I will try to touch on a number of factors that provide the basis for assessing the company’s strength, in the context of the overall economic climate. First and foremost, our balance sheet is strong. Our credit line is solid and we have ample borrowing capacity. Our lead bank is JPMorgan with whom we maintain a solid relationship. Second, our business remains strong as the third quarter results would indicate. To be sure we are never satisfied with our performance. But the core trends are moving in the right direction and we believe we will see a good fourth quarter to end the year. Third, the convenience industry has not historically seen the volatility of other sectors during times of recession. There is no doubt that the full effect of the recession has yet to impact the economy and I am mindful about the risks that a deep recession could present. Nonetheless I am comforted by the fact that the industry while not recession proof, is to a significant degree recession resistant. One metric to follow is the price of gasoline at the pump. If the current…

Thanks Michael and good morning to everyone. As Michael mentioned there’s been a significant amount of uncertainty in the credit markets in recent weeks and we have received a number of inquiries about several specific issues including capital allocation, inquiries about the credit worthiness of our AR portfolio, and the funded status of our pension liabilities. Since Michael has already commented on our capital allocation philosophy, I’m going to focus on the last two issues. Given the impact of the current economic conditions on consumer confidence and spending levels and the large bad debt charge we took last year, there have been questions regarding the health of our accounts receivable portfolio. Keep in mind that last year’s bad debt charge related to two customers that filed for protection under Chapter 11. To be clear the circumstances surrounding these two customers were unrelated to anything happening on a macroeconomic level today. That being said, the current environment had heightened our awareness and our attention to our credit portfolio and we continue to monitor risks with rigor. To reiterate our infrastructure includes a robust credit policy, a skilled credit professional at each division, corporate oversight, legal resources when appropriate, and a very thorough ongoing credit risk assessment process. We believe our credit risk is minimized by the large number of customers that make up our AR portfolio with approximately 50% of our customer base representing large national chains, many of these backed by oil companies, and the other 50% representing smaller independents. Further it is important to note that we have a very short cash cycle with DSOs averaging approximately 9.3 days through September. This gives us an opportunity to react immediately to payment delays and minimizes the credit risk to the value of one or two deliveries at best before we…

(Operator Instructions) Your first question comes from the line of Jonathan Lichter - Sidoti & Company Jonathan Lichter - Sidoti & Company: What are you seeing in terms of same store sales weakness or strength, by geographic region?

It varies, for example Las Vegas where we have a presence the economy of Vegas probably has taken a bigger hit then other markets that we serve so that is, we’re certainly seeing an effect there. Canada, we’re struggling with Alberta but the sales there are very robust. It’s a matter of keeping up with them. But generally overall I’d say on the average, and I reported our same store non-cigarette sales were up about 4.1% which is pretty consistent with historical numbers over the years. So I don’t think you could say that we have seen the effect of the recession. Its been kind of lumpy due to local market factors, some ups, some down but on the average its about normal. And as I said the same store sales in the, if you look year-over-year was up in the third quarter relative to the second quarter which indicates some strengthening. I do think this lower gasoline price, going from less then $60 down from $147 in early July, I think that has as much to do with our consumers as anything else. Jonathan Lichter - Sidoti & Company: How much availability do you have for acquisitions and are you seeing more companies approaching you that are interested in selling?

I wouldn’t say there’s been a rash of companies calling us to sell, but there are a couple that maintain some interest and we’re looking at them.

Your next question comes from the line of James Lee – Unidentified Company James Lee – Unidentified Company: Given the performance this quarter over 6% organic growth and your guidance was $6 billion, it seems like you’re implying a 5.4% growth for Q4, are you being overly conservative, or are you seeing anything unusual in Q4.

We’re not seeing anything unusual and maybe we’re being a tad conservative. It wasn’t enough to change the guidance but we feel very good about the fourth quarter. We don’t see any signs through October that there’s been any change in our glide path. James Lee – Unidentified Company: Is next year, if the economy is in a worst case, how likely is that you can still say profitable, or cash flow positive?

I’d say its extremely likely. I don’t, California could fall off with an earthquake, but absent something very dramatic, some kind of world event, or something, I’m fairly optimistic about next year. We are certainly going to plan a year of growth in profit as well as revenues. James Lee – Unidentified Company: In this environment given the economy and the credit, I imagine a lot of players in this industry are having some tougher times, are you seeing someone like a [McLean] getting more aggressive and trying to get more market share in terms of going out and trying to outbid on contracts? Are you seeing that happening and given the backing from Brookshire?

No I haven’t and I would say [McLean] has been a very intelligent competitor as far as I’m concerned. They do not have a history of dragging down the market and I have certainly seen no change in the behavior of that. It is as we all know this industry is, its predicated on very, very thin margins and they have their business model which incorporates the needs of Wal-Mart and their food service and so I’m sure they have a number of interests and they seem to be doing well. We don’t see much in the way of abnormal behavior. I think there’s a question about the overall declining carton trends. Core-Mark plans to be a market leader in that. We think that ultimately the profitability of the declining cartons has to be shifted in a logical fashion to traditional non-cigarette categories. I think that is ultimately, has to be the solution but that’s not to say that in any one given market one competitor may decide to, if they perceive they’re stronger then another competitor won’t take that as an opportunity to try to make it tough in that marketplace. But so far I have not seen evidence of that. James Lee – Unidentified Company: So do plan to be like that given that you are pretty well capitalized, would you take that opportunity to go take out some of the weaker competitors?

That is not my strategy. I do not think as one of the market leaders, I do not think that that is a beneficial strategy for our investors or in the long-term health of Core-Mark. I can’t take off for two years and say I’m going to go grind weaker competition. That’s just not a good strategy and we want to be a market leader and set the tone and try to help the industry get through this transitioning from a cigarette-based market to a fresh and other products as the industry migrates through that transition. We want to help that, facilitate it and be the market leader in establishing an orderly transition. James Lee – Unidentified Company: On CapEx it looks like you’re looking at $20 million this year, what does it look like next year, is it going to be less next year? I think you had a building out the Toronto division this year, I imagine next year it should be less right?

We haven’t disclosed that yet. Stay tuned. James Lee – Unidentified Company: But do you foresee building out new distribution centers next year?

We’re in the process of reviewing our plans as Michael alluded to. He has just come back from a week and we have the other senior VPs out there reviewing the rest of the divisions. Once they get back we’ll be rolling up their needs requirement and then we’ll be issuing guidance in January, February timeframe.

Your next question comes from the line of Analyst – Winfield Capital Corporation Analyst – Winfield Capital Corporation: I was just curious how you go about taking the data from the PPI and is on a lag basis and how you use that data to determine your FIFO.

Basically there’s just a published PPI indexes and our VP of Tax identifies it. It may be one month off. I’d have to check with him and get back to you on that issue. Analyst – Winfield Capital Corporation: But its not a big lag then right?

Not that I’m aware of, no. Analyst – Winfield Capital Corporation: How should we think about FIFO charges in an environment characterized by a lot of volatility in the PPI?

We really look at it more as a tax strategy in order to minimize our taxes through a higher cost of sales on a tax basis. But we don’t manage and we’ve said this in the past, we don’t manage our business on a LIFO basis. We manage our business on a FIFO basis. Because cash flow as you know is generated real time and the LIFO is a basically a paper entry based on an PPI estimate. Analyst – Winfield Capital Corporation: Right so that’s why you’re always focusing on cash flow from operations which I think is the right thing.

Your next question comes from the line of Kian Ghazi - Hawkshaw Kian Ghazi – Hawkshaw: Could you talk a bit about what you’re seeing as far as rebates from your CPG vendors? Is that turning up, down, flat from prior periods?

Its, I would say strong, good, consistent with our growth. We look forward to a pretty good year with various discounts, rebates, allowances, incentive payments and that sort of thing that we earn and so far throughout the year its been very good and we expect it to end the year on a good note.

On the cigarette side, are you seeing any changes from the cigarette manufacturers?

No, well I would say traditionally in years past, you’d get typically an annual price increase and it would be across all brands. The trend now seems to be very lumpy and they apparently are looking at product rationalization. They seem to be raising prices on some of the slower moving items which probably makes sense. So we’re seeing, this year we saw a few lumpy, odd brands where they would raise prices, $0.50 a carton or something like that, I’d say that’s unusual and different from trends in the past 18 years I’ve been with Core-Mark.

To understand the scenario where the cigarette manufacturers might reduce the rebates or incentives they’re providing to you, if they actually cut back which is in essence a price increase that they would benefit from, do you have mechanisms in your contracts with your customers to pass that along?

Yes. Learning from the school of hard knocks over the years, we put clauses in our contracts that say material changes in our manufacturers’ programs, they have to be reflected in our pricing and in the past where we’ve had decreases in those manufacturers’ programs, that has resulted in a generally industry wide price increase.

Do you already have built in mechanisms into your contracts with your customers for the anticipated declines in cigarette cartons that has been the trend over the period and we’re no longer getting the channel shift into see stores offsetting that, so do you have that built into historical contracts and are you building that into new contracts such that it anticipates the declines and matures at your whole, during the course of let’s call it a three year contract?

Yes, to the latter, probably no to the former. Remember the cigarette, this notion of declining cigarette cartons really became manifest to Core-Mark in the fourth quarter of last year because historically we had been the beneficiary of a channel shift in volume from grocery stores and drug stores and other venues to the convenience industry. Fifteen years ago the convenience industry sold 30% of all cartons, today its roughly 65% of all cartons. So we [inaudible] up until about the fourth quarter of last year, when it became apparent that channel shift wasn’t going to make up for the declining fall, so from about that point forward we became very attentive to inserting clauses in our contracts that say if for declining cartons we’ve got to be able to make that up by some mutually agreeable mechanism. And they are in all of the contracts that we’ve done since the fourth quarter.

Contracts would be for larger customers, your street business which is approximately 50% of the business, I imagine that’s re-pricing on a regular basis and those would already factor in both of those contract structures that we talked about, both anticipating declines in cigarettes as well as if there was a change in cigarette manufacture rebates, that would be immediately reflected in your street business?

Well certainly the latter would be immediately reflected, the former is a little more, that’s a process not a project. That’s a process that will be, I believe that that process with independents in making up for the decline in the carton volume over time, will be through diligence on our part and communication with the retailers. We as an organization, we have projected what the carton would mean at the division level over the next 10 years. And we have focused all of our division people to say look this is the issue, and here are the mechanisms that we’d like to use in negotiations with your retailers. We provide them with excellent movement information by store and it gives them the basis to go out and adjust the prices as we need to and we have had some pretty good success this year in doing that. That hasn’t been 100% but there is no doubt that we are making adjustments as we go along. It will not be a perfect linear process but it is a process that we have made progress this year and its just part of the, managing our place in the market and I do think that we’re focused and that the cigarette carton decline will not be one of the top three, four or five items that we are concerned with at any one point in time. Its just something that we have to be mindful of.

So when you go to that customer in trying to negotiate a portfolio of options of things they could do to offset the decline in cigarette sales, is VCI one of those options to offset the cigarette declines?

No.

So that’s something that’s standalone and you’re not cannibalizing essentially cigarette declines with VCI sales.

Correct and that is a tenant in the creed of VCI and fresh. It’s a very important concept that we do not use VCI and fresh to fill in for the declining cigarette cartons. It is through traditional non-cigarette margins and/or higher margins on remaining cigarette cartons sold, that’s the mechanism. Everybody understands that. I’m hoarse from talking about that to all the divisions. I think everybody knows that very, very clear that that’s just not a strategy that we have.

On your warehouse and distribution costs, through the prepared comments it sounds like there may have been an ounce of satisfaction that the basis point increase as a percent of revenues was lower this quarter then last quarter, and I just want to remind, or point out that the increases in the first half of this year were unacceptable and a smaller increase as a percent of sales is still unacceptable and we need to be making absolute dollar reductions in warehouse and distribution. Would you agree?

Absolutely and if there was any tone of satisfaction in our operating expenses, I mis-communicated and apologize for that. I think I merely tried to comment on the two divisions that while are not where we want them to be I am not satisfied, I am not happy about this year, they did make progress through that. And part of what’s going on, this health and welfare thing, its not just productivity in the warehouse or efficiency of our routes, it’s the fuel which I think is coming down and will help us. Its this health and welfare benefit thing that we had a spike in that and we’re trying to pour through that, we have to manage our health and welfare benefits just like we manage anything else but I think some of these external things are masking some modest, not let’s beat our chest and let’s go to Phoenix and have a nice posh three day celebration, not that at all. You’re exactly right and if my tone portrayed anything different I mis-communicated. We are not happy with that but I think we are beginning to see some improvement and we’re going to keep pushing very hard on that.

So to be clear, absent an acquisition or the opening of another DC, or anything unusual like that, we should be seeing at some point if you are successful absolute dollar declines in warehouse and distribution because we’re running the 24 or whatever number of DCs we have today, at excessive expense levels.

I would say this, I’m not sure about the absolute dollar decline because we still intend to have organic growth which cost vary with volume on a net variable basis, but I do expect holding external factors constant and no acquisitions and so forth, that our operating expense as a percent to sales will come down. That’s just the way distribution works or should work.

Your final question is a follow-up from the line of Jonathan Lichter - Sidoti & Company Jonathan Lichter - Sidoti & Company: On fuel surcharges, were they a positive or negative in the quarter based on the surcharges that you would have set at the end of June?

Our surcharges went up, there is a quarterly program and at the beginning of the third quarter our surcharges went up and of course fuel began to come down although there seems to be a lag factor, there’s always a lag factor in the billing but there’s also a lag factor as a consumer of fuel, what happens in the industry its both good and bad. Wholesale prices go down faster then retail prices. That’s how the retailer makes money because they’re certainly losing it when prices are going up so because of that, you say, well gee how come my fuel price isn’t falling with the price of crude. Its because the retailer is lower prices at a slower rate then wholesale and frankly that spread in our uncovered fuel price didn’t go down as much as I think we all were hoping that it would every day as we’d seen the price of crude, but going into the fourth quarter I think we’re back to a normal spread and I’m knocking on wood, but I don’t think we’ll be talking about fuel in the fourth quarter as a factor in our financials. Jonathan Lichter - Sidoti & Company: So how much was the uncovered fuel costs in Q3?

It was $800,000. Jonathan Lichter - Sidoti & Company: And non-alcoholic beverages, what’s included in that category?

Our retail beverages has everything, its water, all different kinds of water, juices, Gatorade, isotonics— Jonathan Lichter - Sidoti & Company: Is there any reason that sales were down, is it just a cooler summer or something along those lines.

No, there are reasons that our sales are down. Gatorade for example came out with a new line that in effect they are delivering on their DSD trucks and it cannibalized the Gatorade products that we deliver on our trucks and its had a major impact on our volume. Campbell took V8 and moved to having Coke distribute V8. That was an issue with us. So there’s been, those sales declines were 100% attributable to structural changes in manufacturers method of delivering liquids to our retailers. Now we, you might have heard a couple of years ago, one of the major distributors sort of declared, drew a line in the sand and said we’re not making enough on this stuff and we’re going to start back-charging you the manufacturers or come and get your stuff and pull it out of our warehouse. We, in the situation we are today, I’m not sure that was the best course of action because we made a 33 basis point improvement in our non-cigarette margins in the third quarter, it would have been better because the margins on that stuff that we lost with the dollar sales, that had a counter growth effect on our margins and so I wish we hadn’t lost those sales, but those were structural changes made at Coke corporate and Campbell corporate and all that stuff and so be it. That did happen, but its not that those products or that line in general is losing favor, its still very much in demand at a convenience retail store. Jonathan Lichter - Sidoti & Company: Is there any indication that there will be more of these switches?

Well you’d have to say that long-term Pepsi who bought Quaker may over, there was a contract that when they bought them over a number of years, I don’t know if it was 10 years or so, that it could be that Pepsi is going to absorb Gatorade into their distribution system. I don’t know that, but that’s the biggest issue that I think we have going forward that we may in fact, the industry may lose Gatorade.

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

Thank you for your participation in our conference call and for your interest in Core-Mark. If you have any question, give me a call at 650-589-9445.