Revenue Recognition Sales The vast majority of Freds contracts with customers are made at the point of sale (POS) in the retail stores, and the performance obligation is the transfer of merchandise which is satisfied at POS when customer pays for merchandise and title transfers to them. 340B Revenues We evaluated principal versus agent considerations with regards to the 340B Direct program under ASC 606. Because Freds is primarily responsible for fulfilling the promise to provide the 340B Direct prescription drugs and assumes control of and risk for inventory prior to transfer of goods to the customer, including pricing apart from when determined by federal mandate, Freds recognizes revenue on a gross basis as principal for the 340B Direct program. Gift Card and Breakage When customers purchase gift cards, the sale is not recognized until the card is redeemed. The gift cards are not always fully redeemed and as such, the Company recognizes breakage. Based on the results from our historical breakage model, the Company defines the likelihood of redemption as remote after three years of no activity. Layaway Plans Store layaways are agreements with our customers to provide or deliver goods for a specified price at a future date. Layaway programs run annually for a duration of less than one year and are most popular during the Christmas seasons. Under the Companys layaway plan, the customer is obligated to pay only the amount equivalent to the value of the good plus sales tax. The Company does not assess a layaway fee or interest but requires an upfront deposit. The customer does not take delivery of the merchandise until the full value is collected. Our performance obligation is the transfer of merchandise which is satisfied at the point of customer pick-up, not at transaction initiation. Any payments received prior to customer pick-up are considered advance payments and deferred and recognized when the performance obligation is satisfied. Layaway sales are deferred when the customer transaction is initiated and are recognized as revenue when the layaway merchandise is transferred. Disaggregated Revenues In the following table, consolidated sales are disaggregated by major merchandising category. Thirteen Weeks Ended Thirty-Nine Weeks Ended (in thousands) November 3, 2018 November 3, 2018 Pharmacy $ 203,570 $ 692,766 Consumables 119,086 380,993 Household Goods and Softlines 80,277 270,401 Franchise 3,711 9,367 Total $ 406,644 $ 1,353,527