HARD

CORE
 Disclaimer
CONFIDENTIAL INFORMATION

The analyses and conclusions of Broyhill Asset Management contained in this presentation are based on
publicly available information. We recognize that there may be confidential information in the
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Assets managed by Broyhill Asset Management and its affiliates have invested in common stock of
Core-Mark Holding Company, Inc. (“CORE”). Broyhill Asset Management manages funds and
separate accounts that are in the business of trading – buying and selling – securities and financial
instruments. It is possible that there will be developments in the future that cause Broyhill Asset
Management to change its position regarding CORE. Broyhill Asset Management may buy, sell, cover,
or otherwise change the form of its investment in CORE for any reason. Broyhill Asset Management
hereby disclaims any duty to provide any updates or changes to the analyses contained here including,
without limitation, the manner or type of and Broyhill Asset Management investment.
 Agenda
CONFIDENTIAL INFORMATION

 Overview

 Industry Dynamics

 Investment Thesis

 Conclusions
 Core-Mark Holding Company
CONFIDENTIAL INFORMATION

 Core-Mark’s history originated in 1888 when Glaser Bros was

founded in San Francisco

 One of the largest wholesale distributors to the convenience store

industry
 Defensive product base
 Well capitalized business

 Market Capitalization

 Enterprise Value: $302M

 Equity Market Value: 340M

 Recent Valuation

 Share Price: $32

 EV/EBITDA: 3.5
 Price to Earnings: 7.5
Industry
Dynamics
 Convenience is second fastest growing format
CONFIDENTIAL INFORMATION
 Fragmentation in industry is increasing
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 Opportunities for acquisition-driven growth
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 Top 10 states account for 50% of all US C-Stores
CONFIDENTIAL INFORMATION

Source: Company Presentation

Hard CORE
Bulls
 Core-Mark services over 24,000 locations
CONFIDENTIAL INFORMATION

Source: Company Presentation

 Roughly half of CORE’s client base are national chains
CONFIDENTIAL INFORMATION

C-Stores represent greater than 85% of revenues with Alimentation Couche-

Tard (Circle K) accounting for 7.5% of sales and the top ten customers
accounting for 30% of revenues.

Source: Company Presentation

 Strong national footprint with room for expansion
CONFIDENTIAL INFORMATION

CORE’s
distribution
centers are
here
Majority of
C-Stores
are here!

Source: Company Presentation

 Investment Highlights
CONFIDENTIAL INFORMATION

Broad linedistributors
Broad line distributors deliver
deliver only
only about
about halfhalf of in-store
of in-store sales sales

 CORE is well positioned to take share from independents

Differentiation
Differentiation isisachieved
achieved through
through product
product offering
offering and pricing
and pricing

 CORE’s innovative sales and marketing combined with leading

distribution and logistics to drive margin expansion

Highly fragmented
Highly fragmented industry
industry concentrated
concentrated in theineastern
the eastern
states states

 CORE’s strong balance sheet and western footprint make large

eastern wholesalers attractive acquisition candidates for expansion
into new markets

Vendor Consolidationand
Vendor Consolidation and Fresh
Fresh Merchandising
Merchandising trends
trends accelerating
accelerating

 CORE’s VCI Program and Fresh Initiative represents significant

upside potential to sales and profit growth
 Category Overviews
CONFIDENTIAL INFORMATION

Sales fall into two categories: Cigarettes and Food/Non-Food Products

Cigarettes Food/Non-Food
Products

 Cigarettes represent 68% of  Food comprised of fast-food,

total revenue candy, beverages, snacks,
groceries, etc.
 Excise Taxes are a significant
component of revenue  Non-Food includes other
tobacco products and general
 61% of purchases from 20 merchandise
suppliers
 Gross Profit is generated by
 PM and RJR represent 27% “cost plus”
and 14% of purchases

29% of Gross Profit 32% of Sales Drive

71% of Gross Profit
 Secular decline in smokes
CONFIDENTIAL INFORMATION

Estimates indicate total carton volume will decline 34% in next ten years.

Source: Company Presentation

 Has been offset by price inflation
CONFIDENTIAL INFORMATION

Marginal growth from other categories should easily overcome impact to margins.
 Strategic Initiatives
CONFIDENTIAL INFORMATION

Management is driving a three-pronged approach for continued growth

 Vendor Consolidation Initiative (VCI)

 Consolidating deliveries with CORE reduces operational costs for retailers,

while improving Core-Mark margins

 Fresh Food Offering

 Management has proactively positioned COREs distribution capabilities out in

front of the “Fresh” movement.

 Go Where the Stores Are

 CORE’s acquisition strategy is driven by its operational footprint . More recent

acquisitions were located in PA and MA
CONFIDENTIAL INFORMATION
Fresh!!
 “Fresh” sensitivity analysis
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Incremental gross 2012 Food/Non-Food Gross Profit Potential

profit potential from
CORE’s Food/Non-  2008 CORE gross profit : $358M
Food segment is
massive given:  Upside potential to goals of $100M incremental Sales
in VCI and Fresh

Growth of “Fresh  Potential to double gross profit even assuming

Foods” from a near- declining margins and incremental sales growth
zero base
“Stale” Gross Margins
Opportunity for margin
enhancement from 12.50% 12.75% 13.00% 13.25% 13.50%
CORE’s Vendor
25% 365 371 376 381 387
Consolidation Initiative
30% 378 383 388 394 399
“Fresh” CAGR

Opportunities in minor 35% 391 396 401 407 412

product segments have
the potential to drive 40% 405 410 416 421 426
substantial firm-wide 45%` 420 425 431 436 442
gross profit growth.
50% 436 442 447 453 458
 Ownership of Core-Mark common stock
CONFIDENTIAL INFORMATION

Name of Beneficial Owner Shares of Common Owned

Wynnefield Capital Management, LLC 981,602
Giovine Capital Group, LLC 629,500
Dimensional Fund Advisors, LP 613,424
Post Confirmation Trust of Fleming Companies, Inc 607,683
J. Michael Walsh 157,727
Stacy Loretz-Congdon 26,620
Christopher L. Walsh 91,477
Christopher M. Murray 19,316
Thomas B. Perkins 71,987
Robert A. Allen 12,020
Stuart W. Booth 12,020
Gary F. Colter 12,020
L. William Krause 12,020
Harvey L. Tepner 12,020
Randolph I. Thornton 18,020
All Directors and Executive Officers as a Group (14 Persons) 4.6%

Source: CORE Apr-09 Proxy

Valuation
 Historical stock chart
CONFIDENTIAL INFORMATION

Source: Decision Point

 Opportunity for multiple expansion
CONFIDENTIAL INFORMATION

Security EV/EBITDA LTM P/E P/B

Core-Mark 3.5 7.5 1.1

Nash Finch 6.2 9.1 1.2

Spartan Stores 4.5 7.4 1.0
Sysco 8.3 14.9 4.5
United Natural Foods 10.4 19.3 2.1
AMCON Distributing 3.9 3.7 1.5
Industry Average 6.7 10.9 2.1

Core-Mark Price $57 $47 $62

Potential at Peer
Average Multiples: 78% 46% 94%
 Valuation Matrix
CONFIDENTIAL INFORMATION

CORE Valuation Matrix

Market Price = $32.96

0.50% $70.14 $73.52 $77.06 $80.76 $84.64

0.25% $54.71 $57.24 $59.89 $62.66 $65.56

EBITDA Margin

0.00% $41.07 $42.87 $44.75 $46.72 $48.78

-0.25% $28.96 $30.13 $31.34 $32.62 $33.96

-0.50% $18.17 $18.78 $19.43 $20.10 $20.82

-2.0% -1.0% 0.0% 1.0% 2.0%

Sales Growth
Source: Applied Finance Group
 Risks
CONFIDENTIAL INFORMATION

 Economics of convenience store industry

 Consolidation, direct distribution, and a weakening customer base

are threats to the industry’s distributors

 Macroeconomic trends and deflationary pressures

 Deflation would negatively impact profit margins as CORE sales are

driven by “cost plus”

 Declining cigarette sales

 Secular volume decline and potential changes in rebates or

incentives would negatively impact earnings
 Investment Conclusions
CONFIDENTIAL INFORMATION

 High Quality Defensive Business

 Trading at substantial discount to intrinsic value

 With little financial leverage

 And HUGE potential for operating leverage

 Strong Operational Culture

 With management growth initiatives driving margin expansion

 Fragmented Industry

 Provides attractive expansion opportunities

 Would you trust this face?
CONFIDENTIAL INFORMATION

Berkshire owns
McLane Co, the
largest wholesaler
in the industry.

Core-Mark is a
strong second.

Warren’s got
somewhat of a
knack for
identifying
industries with
attractive
fundamentals.
Appendix
 Contact Information
CONFIDENTIAL INFORMATION

Broyhill Asset Management

800 Golfview Park
Post Office Box 500
Lenoir, NC 28645
Phone: 828 758 6100
Fax: 828 758 8919

For more information please contact:

Mr. Christopher R. Pavese, CFA

chris@broyhillasset.com
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