Item 2. Properties

At December 31, 2016, the Company operated 1,738 stores in 49 states. The Company leases approximately 94% of its stores, two distribution sites, its Merchandising Innovation Center (planogram) located in Nashville, Tennessee, as well as the Petsense corporate headquarters located in Scottsdale, Arizona. Store leases typically have initial terms of 10 to 15 years, with two to four renewal periods of five years each, exercisable at our option. No single lease is material to Company operations.

Index

The following is a count of store locations by state:

The following is a list of distribution locations including the approximate square footage and if the location is leased or owned:

(a) The leased facility in Hagerstown is treated as an extension of the existing owned Hagerstown location and is not considered a separate distribution center.

(b) This is a mixing center designed to process certain high-volume bulk products.

The Company’s Store Support Center occupies approximately 260,000 square feet of owned building space in Brentwood, Tennessee, and the Company’s Merchandising Innovation Center occupies approximately 32,000 square feet of leased building space in Nashville, Tennessee.

Index

In fiscal 2017, we plan to begin construction on a new northeast distribution center, as well as an expansion of our existing distribution center in Waverly, Nebraska, which will provide additional distribution capacity once construction is completed.