Key questions and answers from the second quarter fiscal 2007 earnings call conducted by Costco Wholesale Corp. on March 8, 2007.

Could you elaborate on the change in generic pricing and how does it compare to the $4 generic program that you had previously?

The company matched what its competitor did on the $4 for 30 days generic pricing program. Historically, it costs the company more on generics than $4 to fill any prescription. Costco has its own list of generics and offers 100 pills for $10. This new program protects the company and gives best value to its customers.

Could you comment on rise in inventory levels?

Sales in the last part of January and the first part of February were soft. This led to a rise in inventory levels.

Could you comment on the executive membership traffic and ticket trends?

The 21% of executive members represent 53% of sales in the U.S. and Canada. There was about a 3 percentage point increase in sales penetration of executive members under the 2% reward on upgrading program, over the year ago period. The executive members are growing at a lesser rate. Their renewal rates are now in the low 90s.

Over how much time frame would the sales return reserve be applicable?

The $48 million sales return reserve would be spread over the last year or two and the sales return cost might be a penny per share for the last couple of years.

Are a big percentage of TVs returned after 90 days?

Majority of the TVs are returned within 90 days, but when the company does a $2.5 billion a year business in TVs, a small sales return percentage, which has low realization when disposed off, has a greater impact than anticipated.

Are the trends on new club members similar to what you have experienced in the past?

There are no major differences in the trends on new club members.

From what products do you see the most opportunity going forward?

There is more opportunity from general consumer products.

How much longer do you expect Canada to be weak because of the tobacco issue?

Canada is expected to be weak until July or August because of the tobacco issue.

Do you expect international comparable sales in the mid single digit until July or August?

International comparable sales are in double digits as there was a pending price increase there. The detriment should improve a little, but at it is expected to be lower from now until summer.

Where does the conservatism for third quarter earnings guidance come from?