Form 10-Q

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NDOuduyVFdnzcLEtKdozo2wCrrJ2jJQ759+WH+hL86bsrsnK46Zfp0npuFh7l0f8 hnWYe4kueY+lBKXUcCWRQw== 0001193125-06-214148.txt : 20061025 0001193125-06-214148.hdr.sgml : 20061025 20061025061507 ACCESSION NUMBER: 0001193125-06-214148 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20060930 FILED AS OF DATE: 20061025 DATE AS OF CHANGE: 20061025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RADIOSHACK CORP CENTRAL INDEX KEY: 0000096289 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RADIO TV & CONSUMER ELECTRONICS STORES [5731] IRS NUMBER: 751047710 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05571 FILM NUMBER: 061161470 BUSINESS ADDRESS: STREET 1: 100 THROCKMORTON ST STREET 2: STE 1700 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8174153700 MAIL ADDRESS: STREET 1: 100 THROCKMORTON SUITE 1700 CITY: FORTH WORTH STATE: TX ZIP: 76102 FORMER COMPANY: FORMER CONFORMED NAME: TANDY CORP /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: TANDY LEATHER CO DATE OF NAME CHANGE: 19681216 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN HIDE & LEATHER CO DATE OF NAME CHANGE: 19660825 10-Q 1 d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-5571

RADIOSHACK CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

75-1047710

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


Mail Stop CF3-203, 300 RadioShack Circle, Fort Worth, Texas		76102
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (817) 415-3011

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The number of shares outstanding of the issuer’s Common Stock, $1 par value, on October 20, 2006 was 135,822,591.

TABLE OF CONTENTS


		Page
PART I
Item 1.	Financial Statements (Unaudited)	3

	Notes to Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28

Item 4.	Controls and Procedures	29

PART II

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 5.	Other Information	30

Item 6.	Exhibits	30

	Signatures	31

	Index to Exhibits	32

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RADIOSHACK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions, except per share amounts)	2006			2005			2006			2005
Net sales and operating revenues	$	1,059.5		$	1,194.7		$	3,319.4		$	3,409.8
Cost of products sold		571.6			626.6			1,751.4			1,721.3

Gross profit		487.9			568.1			1,568.0			1,688.5

Operating expenses:
Selling, general and administrative		441.6			447.5			1,420.9			1,329.4
Depreciation and amortization		31.9			31.7			97.5			91.6
Impairment of long-lived assets and other charges		29.3			—			38.5			—

Total operating expenses		502.8			479.2			1,556.9			1,421.0

Operating (loss) income		(14.9	)		88.9			11.1			267.5

Interest income		2.5			1.2			3.9			4.8
Interest expense		(11.2	)		(11.7	)		(33.3	)		(30.4	)
Other (loss) income		(2.5	)		—			(4.3	)		10.2

(Loss) income before income taxes		(26.1	)		78.4			(22.6	)		252.1
Income tax (benefit) provision		(9.8	)		(30.1	)		(11.5	)		36.3

Net (loss) income	$	(16.3	)	$	108.5		$	(11.1	)	$	215.8

Net (loss) income per share:

Basic	$	(0.12	)	$	0.76		$	(0.08	)	$	1.42

Diluted	$	(0.12	)	$	0.75		$	(0.08	)	$	1.41

Shares used in computing net (loss) income per share:

Basic		136.5			143.4			136.1			152.5

Diluted		136.5			143.9			136.1			153.2

The accompanying notes are an integral part of these consolidated financial statements.

RADIOSHACK CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)


(In millions, except for share amounts)	September 30, 2006			December 31, 2005			September 30, 2005
Assets Assets
Current assets:
Cash and cash equivalents	$	276.4		$	224.0		$	47.4
Accounts and notes receivable, net		212.3			309.4			227.8
Inventories, net		878.7			964.9			1,162.5
Other current assets		120.7			129.0			101.7

Total current assets		1,488.1			1,627.3			1,539.4

Property, plant and equipment, net		429.7			476.2			674.7
Other assets, net		66.7			101.6			95.2

Total assets	$	1,984.5		$	2,205.1		$	2,309.3

Liabilities and Stockholders’ Equity
Current liabilities:
Short-term debt, including current maturities of long-term debt	$	265.3		$	40.9		$	381.7
Accounts payable		304.3			490.9			484.9
Accrued expenses and other current liabilities		341.9			379.5			281.1
Income taxes payable		11.8			75.0			21.8

Total current liabilities		923.3			986.3			1,169.5

Long-term debt, excluding current maturities		344.7			494.9			501.6
Other non-current liabilities		115.6			135.1			136.7

Total liabilities		1,383.6			1,616.3			1,807.8

Commitments and contingent liabilities (see Notes 6 and 7)

Stockholders’ equity:
Preferred stock, no par value, 1,000,000 shares authorized: Series A junior participating, 300,000 shares designated and none issued		—			—			—
Common stock, $1 par value, 650,000,000 shares authorized; 191,033,000 shares issued		191.0			191.0			191.0
Additional paid-in capital		90.8			87.7			81.8
Retained earnings		1,730.3			1,741.4			1,690.1
Treasury stock, at cost; 55,234,000, 56,071,000 and 56,407,000 shares, respectively		(1,410.0	)		(1,431.6	)		(1,462.3	)
Accumulated other comprehensive (loss) income		(1.2	)		0.3			0.9

Total stockholders’ equity		600.9			588.8			501.5

Total liabilities and stockholders’ equity	$	1,984.5		$	2,205.1		$	2,309.3

The accompanying notes are an integral part of these consolidated financial statements.

RADIOSHACK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30,
(In millions)	2006			2005
Cash flows from operating activities:
Net (loss) income	$	(11.1	)	$	215.8
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		97.5			91.6
Provision for credit losses and bad debts		0.2			0.3
Impairment of long-lived assets and other charges		38.5			—
Other items		13.3			3.0
Changes in operating assets and liabilities:
Accounts and notes receivable		97.6			13.2
Inventories		86.2			(158.8	)
Other current assets		(2.1	)		(8.0	)
Accounts payable, accrued expenses, income taxes payable and other		(291.3	)		(134.3	)

Net cash provided by operating activities		28.8			22.8

Cash flows from investing activities:
Additions to property, plant and equipment		(73.3	)		(124.5	)
Proceeds from sale of property, plant and equipment		10.9			2.8
Other investing activities		0.8			(9.9	)

Net cash used in investing activities		(61.6	)		(131.6	)

Cash flows from financing activities:
Purchases of treasury stock		—			(647.9	)
Sale of treasury stock to employee benefit plans		10.5			22.9
Proceeds from exercise of stock options		1.3			17.0
Changes in short-term borrowings and outstanding checks in excess of cash balances, net		27.8			326.4
Short-term borrowings greater than three months maturity		48.6			—
Reductions of long-term borrowings		(3.0	)		(0.1	)

Net cash provided by (used in) financing activities		85.2			(281.7	)

Net increase (decrease) in cash and cash equivalents		52.4			(390.5	)
Cash and cash equivalents, beginning of period		224.0			437.9

Cash and cash equivalents, end of period	$	276.4		$	47.4

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - BASIS OF FINANCIAL STATEMENTS

We prepared the accompanying unaudited interim consolidated financial statements, which include the accounts of RadioShack Corporation, all majority-owned domestic and foreign subsidiaries and, as applicable, variable interest entities for which we are the primary beneficiary, in accordance with the rules of the Securities and Exchange Commission (“SEC”). Accordingly, we did not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In management’s opinion, all adjustments, of a normal recurring nature considered necessary for a fair statement, are included. The December 31, 2005, consolidated condensed balance sheet was derived from audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles for complete financial statements. However, our operating results for the nine months ended September 30, 2006 and 2005, do not necessarily indicate the results you might expect for the full year. If you desire further information, you should refer to our consolidated financial statements and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2005.

NOTE 2 – STOCK-BASED COMPENSATION

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), which requires companies to measure all employee stock-based compensation awards using a fair value method and record this expense in their consolidated financial statements. In addition, the adoption of SFAS No. 123R requires additional accounting and disclosures related to income tax and cash flow effects resulting from stock-based compensation.

We adopted SFAS No. 123R on January 1, 2006, under the modified prospective application method. Under this method, we record stock-based compensation expense for all awards granted on or after the date of adoption and for the portion of previously granted awards that remained unvested at the date of adoption. Accordingly, prior period amounts have not been restated. Currently, our stock-based compensation relates to stock options, restricted stock awards, and other equity-based awards issued to our employees and directors. All of our equity awards, with the exception of our stock options, are measured at the fair value of our common stock on the grant date and recognized as compensation expense over the applicable vesting period.

Prior to January 1, 2006, we accounted for stock-based compensation using the intrinsic value method. Accordingly, we recognized compensation expense for restricted stock and other equity awards over the service period, but did not recognize compensation expense for stock option awards, because the options were granted at market value on the date of grant.

The following table details the effect of stock-based compensation on net (loss) income and net (loss) income per share for the three and nine months ended September 30, 2006 and 2005, respectively, illustrating the effect of applying the fair value recognition provisions of SFAS No. 123 for the three and nine months ended September 30, 2005.


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions, except per share amounts)	2006			Proforma 2005			2006			Proforma 2005
Net (loss) income, as reported	$	(16.3	)	$	108.5		$	(11.1	)	$	215.8
Stock-based employee compensation expense included in reported net income, net of related tax effects		1.4			1.5			10.5			4.7
Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects		(1.4	)		(4.2	)		(10.5	)		(14.2	)

Net (loss) income	$	(16.3	)	$	105.8		$	(11.1	)	$	206.3

Net (loss) income per share:
Basic – as reported	$	(0.12	)	$	0.76		$	(0.08	)	$	1.42
Basic – pro forma				$	0.74					$	1.35
Diluted – as reported	$	(0.12	)	$	0.75		$	(0.08	)	$	1.41
Diluted – pro forma				$	0.74					$	1.35

The fair value of the stock options granted during the three and nine month periods ended September 30, 2006 and 2005, was estimated using the Black-Scholes-Merton option-pricing model, except for the fair market value of the two million performance options granted to our chief executive officer during the third quarter of 2006, which were valued utilizing the Monte Carlo simulation model. The Black-Scholes-Merton and Monte Carlo simulation models require the use of highly subjective assumptions, including expected option life, expected volatility, and expected employee termination rate. We use historical data to estimate the option life and the employee termination rate, and use historical and implied volatility when estimating the stock price volatility. The fair market value of the stock options granted during the three and nine month periods ended September 30, 2006 and 2005, respectively, was estimated using the following assumptions:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			Proforma 2005			2006			Proforma 2005
Option life (in years)		5.0			4.0			4.9			4.0
Stock price volatility		33.3	%		33.7	%		33.1	%		38.5	%
Dividend yield		1.27	%		1.05	%		1.19	%		0.87	%
Risk free interest rate		5.1	%		3.9	%		5.0	%		3.8	%
Fair value	$	4.53		$	7.00		$	4.92		$	9.48

We periodically grant options to purchase RadioShack common stock to certain of our employees under various stock option plans at exercise prices equal to the fair market value of our common stock at the date of grant. Our current stock option grants have terms of seven years from the grant date. Previously, we granted options with ten year terms. Typically, the options vest ratably over three years from the date of grant. However, during the third quarter of 2006, we granted 4.2 million stock options to our chief executive officer and chief financial officer that vest ratably over four years from the date of grant. Once employment is terminated, the option holder has 90 days in which to exercise all vested options; however, under certain circumstances, some retirees may have three years in which to exercise all vested options. The fair market value of each option is generally recognized as compensation expense on a straight-line basis between the grant date and the date at which the option becomes fully vested. As of September 30, 2006, unrecognized compensation expense related to the unvested portion of our stock options was $27.7 million, which is expected to be recognized over a weighted average period of 1.4 years.

The following table summarizes activity under our stock option plans for the nine months ended September 30, 2006:


	Nine Months Ended September 30, 2006
	Shares (In thousands)		Weighted Average Exercise Price		Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in millions)
Outstanding at beginning of period	20,411		$	33.82
Grants	5,611			15.33
Exercised	(120	)		10.80
Forfeited	(2,880	)		31.89

Outstanding at end of period	23,022		$	29.67	4.1	$	23.3

Exercisable at end of period	17,364		$	33.89	3.3	$	1.0

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock for those awards that have an exercise price currently below the closing price. As of September 30, 2006, we had options outstanding to purchase an aggregate of 4.6 million shares with an exercise price below the quoted price of our stock, resulting in an aggregate intrinsic value of $23.3 million. During the nine months ended September 30, 2006 and 2005, the aggregate intrinsic value of options exercised under our stock option plans was $0.7 million and $6.2 million, respectively, determined as of the date of exercise.

NOTE 3 – BASIC AND DILUTED NET (LOSS) INCOME PER SHARE

Basic net (loss) income per share is computed based on the weighted average number of common shares outstanding for each period presented. Diluted net (loss) income per share reflects the potential dilution that would have occurred if securities or other contracts to issue common stock were exercised, converted, or resulted in the issuance of common stock that would have then shared in our net (loss) income.

The following table reconciles the numerator and denominator used in the basic and diluted net (loss) income per share calculations for the periods presented:


	Three months ended September 30,					Nine months ended September 30,
	2006			2005		2006			2005
Numerator:
Net (loss) income	$	(16.3	)	$	108.5	$	(11.1	)	$	215.8

Denominator:
Weighted average shares		136.5			143.4		136.1			152.5
Incremental common shares attributable to stock option plans		—			0.5		—			0.7

Weighted average shares for diluted net income per share		136.5			143.9		136.1			153.2

Basic net (loss) income per share	$	(0.12	)	$	0.76	$	(0.08	)	$	1.42

Diluted net (loss) income per share	$	(0.12	)	$	0.75	$	(0.08	)	$	1.41

Options to purchase 18.9 million and 18.4 million shares of common stock for the three and nine month periods ended September 30, 2006, respectively, as compared to options to purchase 17.2 million and 16.0 million shares of common stock for the corresponding prior year periods, were not included in the computation of diluted net (loss) income per share because the option exercise price was greater than the average market price of the common stock during the periods reported, and the effect of their inclusion would have been anti-dilutive.

NOTE 4 – COMPREHENSIVE (LOSS) INCOME

Comprehensive (loss) income for the three months ended September 30, 2006 and 2005, was ($17.0) million and $109.0 million, respectively. Comprehensive (loss) income for the nine months ended September 30, 2006 and 2005, was ($12.5) million and $217.0 million, respectively. The other components of comprehensive income in both 2006 and 2005, aside from net (loss) income for the periods reported, were unrealized gains or losses on securities and foreign currency translation adjustments.

NOTE 5 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS No. 154”). SFAS No. 154 requires retrospective application to prior periods’ financial statements for a change in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Additionally, retrospective application is not required when explicit transition requirements specific to newly adopted accounting principles exist. Retrospective application requires the cumulative effect of the change on periods prior to those presented to be reflected in the carrying amounts of assets and liabilities as of the beginning of the first period presented, and the offsetting adjustments to be recorded to opening retained earnings. SFAS No. 154 retains the guidance contained in APB Opinion No. 20 for reporting both the correction of an error in previously issued financial statements and a change in accounting estimate. We adopted the provisions of SFAS No. 154, as applicable, at the beginning of fiscal year 2006, and the adoption did not have a material affect on our financial condition or results of operations.

Effective January 1, 2006, we adopted SFAS No. 123R. SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires that the fair value of such equity instruments be recognized as an expense in the historical financial statements as services are performed. We adopted SFAS No. 123R utilizing the modified prospective transition method, which requires that we recognize compensation expense for all new and unvested share-based payment awards from the January 1, 2006, effective date. As required by SFAS No. 123R, we recognized the cost resulting from all share-based payment transactions, including shares issued under our stock

option, stock deferral and stock purchase plans, in the financial statements. See Note 2 – “Stock-Based Compensation” for further discussion on the impact of this adoption, as well as the valuation methodology and assumptions utilized.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs” (“SFAS No. 151”). This statement amends Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. SFAS No. 151 requires that these items be recognized as current period charges and requires allocation of fixed production overhead to the cost of conversion be based on the normal capacity of the production facilities. We adopted this statement effective January 1, 2006. The results of the adoption of this statement did not have a material impact on our financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; rather, it applies under other accounting pronouncements that require or permit fair value measurements. The provisions of this statement are to be applied prospectively as of the beginning of the fiscal year in which this statement is initially applied, with any transition adjustment recognized as a cumulative-effect adjustment to the opening balance of retained earnings. The provisions of SFAS No. 157 are effective for the fiscal years beginning after November 15, 2007; therefore, we anticipate adopting this standard as of January 1, 2008. We have not determined the effect, if any, the adoption of this statement will have on our financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS No. 158”). SFAS No. 158 requires employers to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of defined benefit pension and other post-retirement benefit plans. SFAS No. 158 requires prospective application; thus, the recognition and disclosure requirements are effective for our fiscal year ending December 31, 2006. Additionally, SFAS No. 158 requires companies to measure plan assets and obligations at their year-end balance sheet date. This requirement is effective for our fiscal year ending December 31, 2008. We are currently evaluating the impact of this standard on our financial condition and results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides guidance on how prior year misstatements should be taken into consideration when quantifying misstatements in current year financial statements for purposes of determining whether the current year’s financial statements are materially misstated. SAB 108 permits registrants to record the cumulative effect of initial adoption by recording the necessary “correcting” adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings only if material under the dual method. SAB 108 is effective for fiscal years ending on or after November 15, 2006. We do not expect the adoption of SAB 108 to have a material impact on our financial condition or results of operations.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that we recognize in the financial statements the impact of a tax position if that position will more likely than not be sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition provisions. FIN 48 is effective for fiscal years beginning after December 15, 2006, and we will adopt FIN 48 as of January 1, 2007. We are currently evaluating the impact of this interpretation on our financial condition and results of operations.

NOTE 6 – LITIGATION

States District Court for the Northern District of Illinois. We have reached a tentative settlement agreement with counsel for the Perez plaintiffs and four other wage-hour lawsuits pending against us. This global settlement would result in a payment by us of approximately $8.8 million, in the aggregate, to resolve all five of the pending lawsuits. Of this amount, a charge of $8.5 million was recognized during the quarter ended June 30, 2006, with the balance recognized during the quarter ended September 30, 2006. The respective courts will need to approve the tentative settlement. We anticipate the settlement will ultimately be approved by each court. If, however, a final settlement cannot be reached, we nevertheless believe we have meritorious defenses, and in such event we would continue to vigorously defend these cases.

We have various other pending claims, lawsuits, disputes with third parties, investigations and actions incidental to the operation of our business. Although occasional adverse settlements or resolutions may occur and negatively impact earnings in the period or year of settlement, it is our belief that their ultimate resolution will not have a material adverse effect on our financial condition or liquidity.

NOTE 7 – COMMITMENTS AND CONTINGENT LIABILITIES

We have contingent liabilities related to retail leases of locations that were assigned to other businesses. The majority of these contingent liabilities relate to various lease obligations that were assigned to CompUSA, Inc. (“CompUSA”) as part of the sale of our Computer City, Inc. subsidiary to CompUSA in August 1998. In the event CompUSA or the other assignees, as applicable, are unable to fulfill their obligations, we would be responsible for rent due under the leases. Our rent exposure from the remaining undiscounted lease commitments as of September 30, 2006, assuming no projected sublease income, is approximately $99 million. However, we have no reason to believe that CompUSA or the other assignees will not fulfill their obligations under these leases or that we would be unable to sublet the properties. Consequently, we do not believe there will be a material impact on our financial statements from any fulfillment of these contingencies.

NOTE 8 – REVOLVING CREDIT FACILITIES

At September 30, 2006, we had an aggregate of $625 million borrowing capacity available under our existing credit facilities. These facilities consist of the following:


Amount of Facility		Expiration Date
$300 million		June 2009
$325 million		June 2011

These credit facilities support our commercial paper program, as well as provide a source of liquidity, if for any reason the commercial paper market is unavailable to us. As of September 30, 2006, there were no outstanding borrowings under these credit facilities. Our outstanding debt and bank syndicated credit facilities have customary terms and covenants, and we were in compliance with these covenants at September 30, 2006.

In June 2006, we replaced our existing $300 million five-year credit facility expiring June 2007 with a $325 million five-year credit agreement expiring June 2011. The new facility has a more favorable fixed charge coverage ratio, and provides for the exclusion of cash turnaround expenses from the covenant calculation. We also amended the $300 million facility expiring in June 2009 to include similar covenants and terminated our $130 million 364-day revolving credit facility.

NOTE 9 – SHORT-TERM DEBT

On September 30, 2006, short-term debt included $150 million of long-term debt that is due within one year. A corresponding reduction is shown in long-term debt.

NOTE 10 – SEGMENT REPORTING

We have two reportable segments: RadioShack company-operated stores and kiosks. RadioShack company-operated stores consist of our 4,460 retail stores, all under the RadioShack brand name, but exclude our Canadian company-operated stores. Kiosks consist of our network of 778 kiosks, which we do not operate under the RadioShack brand, primarily located in major shopping malls and SAM’S CLUB locations. Both of our reportable segments engage in the sale of consumer electronic products; however, our kiosks primarily offer wireless products and associated accessories. These reportable segments are managed separately due to our kiosks’ narrow product offerings and performance relative to size.

We evaluate the performance of each reportable segment based on operating income, which is defined as sales less cost of products sold and certain direct operating expenses, including labor and occupancy costs. Asset balances by reportable segment have not been included in the segment table below, as these are managed on a company-wide level and are not allocated to each segment for management reporting purposes.

Amounts included in the other category below consist of our business activities that are not separately reportable, and include our dealer network, e-commerce, third-party repair services, foreign operations and corporate sales.


(In millions)	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Net sales and operating revenues:
RadioShack company-operated stores	$	880.1		$	1,035.5		$	2,816.9		$	3,024.0
Kiosks		87.0			71.8			243.7			169.1
Other		92.4			87.4			258.8			216.7

	$	1,059.5		$	1,194.7		$	3,319.4		$	3,409.8

Operating (loss) income:
RadioShack company-operated stores ⁽¹⁾	$	88.9		$	158.2		$	311.3		$	512.0
Kiosks ⁽²⁾		(26.1	)		(4.9	)		(29.0	)		(12.1	)
Other ⁽³⁾		2.9			8.0			(1.3	)		23.6

		65.7			161.3			281.0			523.5
Unallocated ⁽⁴⁾		(80.6	)		(72.4	)		(269.9	)		(256.0	)

Operating (loss) income		(14.9	)		88.9			11.1			267.5

Interest income		2.5			1.2			3.9			4.8
Interest expense		(11.2	)		(11.7	)		(33.3	)		(30.4	)
Other (loss) income		(2.5	)		—			(4.3	)		10.2

(Loss) income before income taxes	$	(26.1	)	$	78.4		$	(22.6	)	$	252.1

Depreciation and amortization:
RadioShack company-operated stores⁽⁵⁾	$	14.1		$	13.2		$	43.8		$	38.3
Kiosks		2.8			2.2			8.3			6.6
Other		0.2			0.2			0.9			0.6

		17.1			15.6			53.0			45.5
Unallocated ⁽⁶⁾		14.8			16.1			44.5			46.1

	$	31.9		$	31.7		$	97.5		$	91.6

Capital expenditures:
RadioShack company-operated stores	$	13.4		$	21.1		$	39.3		$	44.0
Kiosks		0.2			8.3			1.3			11.4
Other		1.9			0.4			2.2			0.9

		15.5			29.8			42.8			56.3
Unallocated ⁽⁷⁾		10.4			15.6			30.5			68.2

	$	25.9		$	45.4		$	73.3		$	124.5

⁽¹⁾

Operating (loss) income for the three and nine months ended September 30, 2006, includes $8.9 million and $29.6 million of charges, respectively, for costs associated with our turnaround plan and related restructuring activities in the RadioShack company-operated stores segment. The $29.6 million charge for the nine months ended September 30, 2006, includes a $9.2 million impairment charge related to the disposal of long-lived assets.

⁽²⁾	Operating (loss) income for the three and nine months ended September 30, 2006, includes an $18.6 million and $10.7 million impairment of the goodwill and an intangible asset, respectively, in the kiosks segment. See Note 11 for further discussion.

⁽³⁾	The other category included in operating (loss) income for the nine months ended September 30, 2006, includes a $2.2 million charge for costs associated with the closure of certain service centers.

⁽⁴⁾

The unallocated category included in operating (loss) income consists of overhead and corporate expenses that are not allocated to the separate reportable segments for management reporting purposes. Unallocated costs include corporate departmental expenses such as labor and benefits, as well as advertising, insurance, distribution and information technology costs. Included for the three and nine months ended September 30, 2006, is a $10.6 million charge related to the reduction in work force at our corporate headquarters. Also included are charges of $0.6 million and $2.8 million for the three and nine months ended September 30, 2006, associated with our two distribution center closures. In addition, we had a gain on the sale of fixed assets related to the distribution center closures of $2.7 million for the nine months ended September 30, 2006.

⁽⁵⁾	Depreciation and amortization for RadioShack company-operated stores for the three and nine months ended September 30, 2006, includes an incremental charge of $0.6 million and $1.8 million, respectively, in accelerated depreciation for stores closed in connection with our turnaround plan.

⁽⁶⁾	Depreciation and amortization included in the unallocated category primarily relates to information technology assets.

⁽⁷⁾	Capital expenditures included in the unallocated category primarily relate to information technology assets.

NOTE 11 – GOODWILL AND INTANGIBLE ASSET IMPAIRMENT

We purchased certain assets from Wireless Retail, Inc. during the fourth quarter of 2004, for $59.6 million, which resulted in the recognition of $18.6 million of goodwill and a $32.1 million intangible asset related to a five year agreement with SAM’S CLUB to operate wireless kiosks in approximately 540 SAM’S CLUB locations nationwide. As a result of continued company and wireless industry growth challenges, together with changes in our senior leadership team during the third quarter of 2006 that resulted in a refocus on allocation of capital and resources towards other areas of our business, we determined that our long-lived assets, including goodwill, associated with our kiosk operations were impaired. We performed impairment tests of both the long-lived assets associated with our SAM’S CLUB agreement, including the intangible asset relating to the five year agreement, and the accompanying goodwill.

With respect to the long-lived tangible and intangible assets, we compared their carrying values with their estimated fair values using a discounted cash flow model, which reflected our lowered expectations of wireless revenue growth and the ceased expansion of our kiosk business, and determined that the intangible asset relating to the five year agreement was impaired. This assessment resulted in a $10.7 million impairment charge of the intangible asset. The remaining intangible balance of $8.6 million will be amortized over the remaining life of the SAM’S CLUB agreement, which is scheduled to expire in September 2009.

With respect to the goodwill of $18.6 million, we estimated the fair value of the SAM’S CLUB reporting unit using a discounted cash flow model similar to that used in the long-lived asset impairment test and compared it with the carrying value of the reporting unit and determined that the goodwill was impaired. As the carrying value of the reporting unit exceeded its estimated fair value, we then compared the implied fair value of the reporting unit’s goodwill with the carrying amount of goodwill, and this resulted in an $18.6 million impairment of goodwill.

These impairment charges, aggregating $29.3 million, were recorded within impairment of long-lived assets and other charges in the accompanying 2006 Consolidated Statement of Income.

NOTE 12 – TURNAROUND PROGRAM

On February 17, 2006, as a result of unfavorable profitability experienced within our RadioShack company-operated stores, we announced the commencement of a turnaround plan. The turnaround plan was developed to identify opportunities to rationalize our cost structure and increase average unit volume and profitable square footage in our RadioShack company-operated stores. The original terms of the turnaround plan consisted of the closing of 400-700 company-operated stores, consolidating certain of our distribution centers, streamlining our overhead infrastructure, and updating our merchandise inventory.

The actual charges for initiatives under the turnaround plan were recorded in the period in which we committed to formalized restructuring plans or executed the specific actions contemplated by the program and all criteria for

restructuring charge recognition under the applicable accounting guidance had been met. Charges incurred as part of the turnaround plan are recorded in cost of products sold; selling, general and administrative expense; and depreciation and amortization with the exception of the asset impairment charges, which are disclosed in a separate caption within our consolidated statements of income.

Store Closures: As of September 30, 2006, we had closed 481 stores as a result of our turnaround program. Our decision to close these stores was made on a store-by-store basis, and there was no geographic concentration of closings for these stores.

For these closed stores, we recognized a charge of $8.7 million for future lease obligations and negotiated buy-outs with landlords. A lease obligation reserve is not recognized until a store has been closed or when a buy-out agreement has been reached with the landlord.

Regarding the 481 stores we closed as a result of the turnaround program during the nine months ended September 30, 2006, we recorded an impairment charge of $9.2 million related to the long-lived assets associated with certain of these stores. We also recognized $1.8 million in accelerated depreciation associated with store assets of the closed stores for which the useful life has been changed due to the store closures. It was determined that the net book value of several of the stores’ long-lived assets was not recoverable based on the remaining estimated future cash flows related to these specific stores.

In connection with these store closures, we identified 601 retail employees whose positions were terminated by September 30, 2006. All of these employees were paid severance, and some earned retention bonuses if they remained employed to certain agreed-upon dates. The development of a reserve for these costs began on the date that the terms of severance benefits were established and communicated to the employees, and the reserve was recognized over the minimum retention period. As of September 30, 2006, $3.8 million has been recognized as retention and severance benefits for store employees, with $3.5 million in benefits paid to date.

Additionally, as part of our store closure activities, we incurred $6.1 million in expenses primarily in connection with fees paid to outside liquidators and for close-out promotional activities for the 481 stores.

Distribution Center Consolidations: We closed a distribution center located in Southaven, Mississippi, and sold a distribution center in Charleston, South Carolina, in 2006. During the nine months ended September 30, 2006, we recognized a lease obligation charge in the amount of $2.0 million and a gain of $2.7 million on the sale of the Charleston distribution center. In addition, we incurred a $0.5 million charge related to severance for approximately 100 employees. Additionally, there were $0.3 million in other expenses.

Service Center Operations: We closed or sold five service center locations during the nine months ended September 30, 2006, resulting in the elimination of approximately 350 positions. We recognized a charge of $1.2 million and $0.9 million related to lease obligations and severance, respectively. This severance obligation was paid as of September 30, 2006. Additionally, there were $0.1 million in other expenses.

Overhead Cost Reductions: Management conducted a review of our cost structure to identify potential sources of cost reductions. In connection with this review, we made decisions to lower these costs, including reducing our advertising spend rate in connection with adjustments to our media mix.

During the quarter ended September 30, 2006, we reduced our workforce by approximately 420 positions, primarily within our corporate headquarters. We recorded charges for termination benefits and related costs of $10.6 million, of which $4.6 million had been paid as of September 30, 2006.

Inventory Update: We are replacing underperforming merchandise with new, faster-moving merchandise. We recorded a pre-tax charge of approximately $62 million during the fourth quarter of 2005, as a result of both our normal inventory review process and the inventory update aspect of our turnaround program. We will continue to review our inventory assortment.

The following table summarizes the activity related to the 2006 turnaround plan from February 17, 2006, through September 30, 2006:


(In millions)	Severance			Leases			Asset Impairments			Accelerated Depreciation			Other			Total
Total charges through June 30, 2006	$	4.3		$	7.8		$	9.2		$	1.2		$	2.0		$	24.5
Total spending through June 30, 2006, net of amounts realized from sale of fixed assets		(0.2	)		(1.0	)		—			—			(1.9	)		(3.1	)
Total non-cash items		—			0.3			(9.2	)		(1.2	)		(0.1	)		(10.2	)
Deferred gain on sale and leaseback of distribution center		—			—			—			—			2.0			2.0

Accrual at June 30, 2006		4.1			7.1			—			—			2.0			13.2
Additional charges in Q3		10.4			4.2			—			0.6			2.8			18.0
Total spending		(9.1	)		(5.5	)		—			—			(2.0	)		(16.6	)
Total non-cash items		—			0.5			—			(0.6	)		—			(0.1	)

Accrual at September 30, 2006	$	5.4		$	6.3		$	—		$	—		$	2.8		$	14.5

All stores identified for closure under the turnaround plan were closed as of July 31, 2006. Additionally, we will continue to negotiate buy-out agreements with our landlords; however, remaining lease obligations still exist at September 30, 2006. There is uncertainty as to when, and at what cost, we will fully settle all remaining lease obligations. See the allocation of our turnaround charges within our segments in Note 10 – Segment Reporting.

NOTE 13 - RADIOSHACK INVESTMENT PLAN

In April 2004, we amended our employee stock purchase plan and renamed it the RadioShack Investment Plan (the “Investment Plan”). Only employees participating in the former plan as of April 29, 2004, could participate in the Investment Plan. New employees were not eligible to participate in the Investment Plan. Effective June 30, 2006, the Investment Plan was suspended and distributions took place in August 2006. As of September 30, 2006, the Investment Plan did not hold any assets.

NOTE 14 - RADIOSHACK 401(k) PLAN

The RadioShack 401(k) Plan (“401(k) Plan”), a defined contribution plan, was amended on July 1, 2006, and, as amended, allows a participant to defer, via payroll deductions, from 1% to 75% of their annual compensation, limited to certain annual maximums set by the Internal Revenue Code. The amended 401(k) Plan also presently provides that our contribution to each participant’s account maintained under the 401(k) Plan be an amount equal to 100% of the participant’s contributions up to 4% of their annual compensation. This percentage contribution by us is discretionary and may change in the future.

NOTE 15 - TERMINATION PROTECTION PLANS

On May 18, 2006, our Board of Directors approved amendments to RadioShack’s Termination Protection Plan (Level I) (the “Level I Plan”). The Level I Plan applies to our officers (other than officers that are parties to a Termination Protection Agreement with RadioShack). The amendments to the Level I Plan include a modification that requires us to pay a comparable benefit amount equal to a specified percentage of a participant’s base salary rather than requiring us to provide certain named employee benefits for one year. The Board of Directors also approved the adoption of an Officers’ Severance Program, a uniform severance program to apply to officers in the event of non-cause terminations.

Our Board of Directors also approved the termination of the Termination Protection Plan (Level II) (the “Level II Plan”). The Level II Plan provided for defined termination benefits to be paid to certain of our eligible, non-officer employees who have been terminated, without cause, in connection with a change in control of RadioShack. In lieu of the Level II Plan, the Board of Directors approved a severance program for eligible, non-officer employees who are terminated under certain circumstances.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”)

This section of our Quarterly Report discusses our results of operations, liquidity and financial condition, and certain factors that may affect our future results, including various economic and industry-wide factors. You should read this MD&A in conjunction with our consolidated financial statements and accompanying notes included in this Quarterly Report.

OVERVIEW

RadioShack is primarily a retailer of consumer electronics products and services. We seek to differentiate ourselves from our competitors by providing cost-effective solutions to meet the routine electronics needs and distinct electronics wants of our customers. We believe this strategy allows us to take advantage of the unique opportunities provided by our extensive retail presence, knowledgeable sales staff, and relationships with reputable vendors.

Overall our focus is concentrated in four major areas:

•

Provide our customers a positive in store experience

•

Grow gross profit dollars by increasing the overall value of each ticket

•

Reduce costs continually throughout the organization

•

Allocate the dollars generated from operations appropriately, investing only in projects having an adequate return, or that are operationally necessary

TURNAROUND PROGRAM OVERVIEW

Due to certain negative results in our business, we announced a turnaround program on February 17, 2006, with the following goals:

•

Increase the average unit volume of our RadioShack company-operated store base

•

Rationalize our cost structure

•

Grow profitable square footage in our store portfolio

We are replacing slower-moving merchandise with new, faster-moving merchandise. During the fourth quarter of 2005 and the first quarter of 2006, we identified underperforming inventory for replacement and have liquidated a vast majority of these items. We are using the space freed up through this liquidation for other merchandise.

We are also concentrating our efforts and investments on improving top-performing stores. As of September 30, 2006, we have closed 481 of our RadioShack company-owned stores, based on criteria such as weak financial performance, poor real estate, subpar brand representation, and likelihood of transferring sales to other RadioShack stores. Our decision to close these stores was made on a store-by-store basis, and there was no geographic concentration of closings for these stores.

In addition, we closed a distribution center located in Southaven, Mississippi, and sold a distribution center in Charleston, South Carolina, in 2006, and we closed or sold five of our service centers. We have reviewed overhead expenses to identify potential sources of cost reduction and focus our resources on cost-saving measures, including reductions in our advertising spend.

See “Financial Impact of Turnaround Program” below for a discussion of the financial impact of our turnaround program.

KEY INDICATORS OF FINANCIAL PERFORMANCE FOR MANAGEMENT

We use several key financial performance metrics, including metrics related to net sales and operating revenues, gross profit and gross margin.

Net Sales and Operating Revenues Metrics

As a retailer, we consider growth in revenue to be an important indicator of our financial performance. We examine our revenue by using several key metrics, including overall change in net sales and operating revenues and comparable store sales growth. Our recent trends in revenue growth have not met our expectations.

The change in net sales and operating revenue provides us with an overall indication of the demand for our products and services. Comparable store sales include the sales of any domestic retail location where we have a physical presence, including RadioShack company-operated stores and kiosks, that has more than 12 full months of sales.

The table below summarizes these revenue metrics for the periods indicated:


	Three Months Ended September 30,
	2006		2005		2004
Consolidated net sales and operating revenues (decline) growth	(11.3	)%	8.5	%	3.6	%
Comparable store sales (decrease) increase	(9.6	)%	1.0	%	4.9	%

Both consolidated net sales and operating revenues and comparable store sales declined in 2006, in part due to a sales decrease within our RadioShack company-operated stores segment’s wireless and modern home platforms. Additionally, these decreases were partially attributable to a change in the manner in which we recognize income associated with sales of prepaid wireless airtime. Beginning in 2006, principally as a result of changes in our agreements with wireless carriers, we no longer record the full value of airtime purchased by customers, but rather record only our markup on the sale as revenue. This change reduced our revenue by approximately $35.0 million and $100.5 million for the quarter and nine months ended September 30, 2006, respectively, as compared to the corresponding prior year periods. This change had no impact on our gross profit or operating income. Consolidated net sales and operating revenues were also impacted by the 481 closed stores associated with our turnaround plan.

Gross Profit and Gross Margin Metrics

We view our gross profit dollars as a key metric of our financial performance, as it indicates the extent to which we are able to manage our product costs and sales volume. Our third quarter gross profit was unfavorably impacted by the softness we are continuing to experience in our postpaid wireless sales activity.

The table below summarizes gross profit and gross margin for the periods indicated:


	Three Months Ended September 30,
(In millions)	2006			2005			2004
Gross profit	$	487.9		$	568.1		$	556.8
Gross margin		46.1	%		47.6	%		50.5	%

Operating (loss) Income

Operating (loss) income from our two operating segments, as well as the other and unallocated categories, is as follows:


	Three Months Ended September 30,
(In millions)	2006			2005			2004
RadioShack company-operated stores	$	88.9		$	158.2		$	193.0
Kiosks ⁽¹⁾		(26.1	)		(4.9	)		(0.2	)
Other ⁽²⁾		2.9			8.0			8.6

		65.7			161.3			201.4

Unallocated ⁽³⁾		(80.6	)		(72.4	)		(84.2	)

Operating (loss) income	$	(14.9	)	$	88.9		$	117.2

⁽¹⁾	Included in the kiosks segment are charges of $18.6 million and $10.7 million for impairment of goodwill and an intangible asset, respectively, for the three months ended September 30, 2006.

⁽²⁾	The decline in this category for the three months ended September 30, 2006, was primarily driven by a decline in our repair center operating income.

⁽³⁾

Included in the unallocated category are overhead and corporate expenses that are not allocated to the separate reportable segments for management reporting purposes. Unallocated costs include corporate departmental expenses such as labor and benefits, as well as advertising, insurance, distribution and information technology costs.

For more information regarding our operating segments, see Note 10 – “Segment Reporting” in our Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS

RadioShack Retail Outlets

The table below shows our retail locations at September 30, 2006, allocated among domestic RadioShack company-operated stores, kiosks, and dealer and other outlets.


	September 30, 2006	June 30, 2006	March 31, 2006	December 31, 2005	September 30, 2005
RadioShack company- operated stores ⁽¹⁾	4,460	4,746	4,933	4,972	4,990
Kiosks ⁽²⁾	778	777	778	777	743
Dealer and other outlets ⁽³⁾	1,620	1,635	1,662	1,711	1,728

Total number of retail locations	6,858	7,158	7,373	7,460	7,461

⁽¹⁾

During the past four quarters, we closed a total of 530 RadioShack company-operated stores in the U.S., net of new store openings and relocations. This decline resulted primarily from the implementation of our turnaround strategy, as well as our decision not to renew leases on other locations that failed to meet our financial return goals. See “Turnaround Program Overview” included in MD&A above.

⁽²⁾

SAM’S CLUB has the unconditional right to assume the operation of up to 75 kiosk locations (in total), as well as additional kiosks in the event we fail to meet certain specified performance metrics. They exercised this unconditional right to assume operation of 23 kiosk locations during the first quarter of 2005 and 21 in the fourth quarter of 2005 that were previously operated by us.

⁽³⁾	During the past four quarters, we closed 117 dealer outlets (typically by terminating our relationship with the dealers), net of new outlet openings and conversions to RadioShack company-operated stores. This declining trend is due to the closure of smaller outlets.

Net Sales and Operating Revenues

Consolidated net sales and operating revenues for our two operating segments and other sales are as follows:


	Three Months Ended September 30,
(In millions)	2006		2005		2004
RadioShack company-operated stores	$	880.1	$	1,035.5	$	1,028.8
Kiosks		87.0		71.8		1.4
Other sales		92.4		87.4		71.3

Consolidated net sales and operating revenues	$	1,059.5	$	1,194.7	$	1,101.5


	Nine Months Ended September 30,
(In millions)	2006		2005		2004
RadioShack company-operated stores	$	2,816.9	$	3,024.0	$	3,046.4
Kiosks		243.7		169.1		4.0
Other sales		258.8		216.7		197.5

Consolidated net sales and operating revenues	$	3,319.4	$	3,409.8	$	3,247.9

Sales decreased 11% to $1,059.5 million for the quarter ended September 30, 2006, from $1,194.7 million in the corresponding prior year period. For the nine months ended September 30, 2006, our overall sales decreased 3% to $3,319.4 million, compared to $3,409.8 million for the same period in 2005. The decrease for the quarter was primarily the result of a 14% decrease in our wireless platform sales and a 60% decrease in our service platform sales due primarily to the manner in which we began recognizing sales of prepaid wireless airtime in 2006. In addition, the platform decreases were affected by the decline in the number of RadioShack company-operated stores as a result of our turnaround plan. The decrease for the nine months ended September 30, 2006, was the result of a 58% sales decrease in our service platform, a 7% sales decrease in our modern home platform, and a 2% sales decrease in our wireless platform. The decline in the number of RadioShack company-operated stores as a result of our turnaround plan also affected these platform decreases. The sales decrease for the nine months was partially offset by a 16% sales increase in our personal electronics platform and a 4% sales increase in our accessory platform. We had a 9.6% and 4.5% decrease in comparable company store sales for the quarter and nine months ended September 30, 2006, respectively. Consolidated sales decreased primarily from a decline in RadioShack company-operated store sales, despite increased sales in both kiosks and other sales.

RadioShack Company-Operated Stores

All sales in the platforms discussed below were impacted by the closure of RadioShack company-operated stores related to our turnaround plan.

Sales in our wireless platform (includes wireless handsets and communication devices such as scanners and two-way radios) decreased 21% and 9% for the quarter and nine months ended September 30, 2006, respectively, when compared to the corresponding prior year periods. These decreases were primarily driven by declines in unit sales of wireless handsets. Factors contributing to this decline for the quarter include an unfavorable mix shift to prepaid handsets from postpaid, a sluggish industry environment, a sharp unit declines in the northeastern United States, fewer RadioShack stores, and the need for more effective merchandising and store operations tactics to address the market-specific needs of wireless customers.

Sales in our accessory platform (includes accessories for home entertainment products, wireless handsets, digital imaging products and computers) decreased 1% for the quarter, but increased 3% for the nine months ended September 30, 2006, respectively, when compared to the corresponding prior year periods. The decrease in the quarter ended September 30, 2006, was primarily the result of a decline in home entertainment accessory sales, although partially offset by higher sales of digital music accessories. The increase for the nine months ended September 30, 2006, was primarily the result of higher sales of digital music accessories, Bluetooth wireless accessories and flash memory; however, this increase was partially offset by a decline in home entertainment accessory sales.

Sales in our modern home platform (includes residential telephones, home audio and video end-products, direct-to-home (“DTH”) satellite systems, and computers) decreased 14% and 9% for the quarter and nine months ended September 30, 2006, respectively, when compared to the corresponding prior year periods. These decreases were primarily due to lower sales of telephones, home computers, video products such as DVD players, and small televisions.

Sales in our personal electronics platform (includes digital cameras, camcorders, toys, digital music players and satellite radios) increased 2% and 16% for the quarter and nine months ended September 30, 2006, respectively, when compared to the corresponding prior year periods. These sales increases were driven primarily by increased sales of digital music players and satellite radios.

Sales in our power platform (includes general and special purpose batteries and battery chargers) decreased 13% and 10% for the quarter and nine months ended September 30, 2006, respectively, when compared to the corresponding prior year periods. These sales decreases were due primarily to a decrease in sales of both general and special purpose batteries caused by factors such as store traffic counts, higher sales in the third quarter of 2005 related to the busy hurricane season, reduced sales of products requiring batteries, and customer tendencies to simply replace older phones rather than replacing batteries.

Sales in our service platform (includes prepaid wireless airtime, bill payment revenue and extended service plans) decreased 61% and 59% for the quarter and nine months ended September 30, 2006, respectively, when compared to the corresponding prior year period. These decreases were primarily attributable to a change in the manner in which we recognize income associated with sales of prepaid wireless airtime. Beginning in 2006, principally as a result of changes in our agreements with wireless carriers, we no longer record the full value of airtime purchased by customers, but rather record only our markup on the sale as revenue. This change reduced our total company-operated stores revenue by approximately $34.1 million and $97.3 million for the quarter and nine months ended September 30, 2006, as compared to the corresponding prior year periods, but had no impact on our gross profit or operating income.

Sales in our technical platform (includes wire and cable, connectivity products, components and tools, as well as hobby and robotic products) decreased 4% and 1% for the quarter and nine months ended September 30, 2006, respectively, when compared to the corresponding prior year periods. These decreases were primarily the result of a decrease in sales of tools.

Kiosks

Kiosk sales increased $15.2 million or 21.2% and $74.6 million or 44.1% for the quarter and nine months ended September 30, 2006, respectively, when compared to the corresponding prior year periods. This increase was the result of an increased number of kiosk locations and improved sales productivity at our SAM’S CLUB locations. Kiosk sales consist primarily of wireless platform sales and related accessory platform sales.

Other Sales

Other sales include sales to our independent dealers, outside sales through our service centers, sales generated by our www.radioshack.com Web site, sales to our Mexico joint venture, sales in our Canadian company-operated stores, sales to commercial customers, and outside sales of our global sourcing operations and manufacturing facilities. Other sales were up $5.0 million or 5.7% and $42.1 million or 19.4% for the quarter and nine months ended September 30, 2006, respectively, when compared to the corresponding prior year periods. These sales increases were primarily due to increased sales to our network of independent dealers, which was partially offset by the negative impact from our sold repair centers.

Gross Profit

Consolidated gross profit for the three months ended September 30, 2006, was $487.9 million or 46.1% of net sales and operating revenues, compared with $568.1 million or 47.6% of net sales and operating revenues in the corresponding prior year period, resulting in a 14.1% decrease in gross profit and a 1.5 percentage point decrease in our gross margin rate. For the nine months ended September 30, 2006, gross profit dollars decreased $120.5 million, while the gross margin rate declined 2.3 percentage points to 47.2% from 49.5% in the corresponding 2005 period. These decreases were primarily the result of inventory liquidation in our closing stores; a mix change toward lower gross margin products, including higher relative sales of wireless prepaid and upgrade handsets and lower margin accessories; and more aggressive promotional activity in prior quarters. The decrease in gross

margin rate was partially offset by the change in the manner in which we began recognizing income associated with sales of prepaid wireless airtime in 2006, as discussed above.

Selling, General and Administrative Expense

Our consolidated SG&A expense decreased 1.3% or $5.9 million for the quarter, but increased 6.9% or $91.5 million for the nine months ended September 30, 2006, when compared to the corresponding prior year periods. This change represents a 4.2 percentage point increase to 41.7% from 37.5% of net sales and operating revenues for the quarter and a 3.8 percentage point increase to 42.8% from 39.0% of net sales and operating revenues for the nine months ended September 30, 2006, when compared to the corresponding prior year periods.

The decrease in consolidated SG&A for the quarter ended September 30, 2006, was primarily attributable to the dollar decrease in advertising expense. Additionally, the impact of our headcount reductions from store closures, repair center closures and corporate headquarters reductions lowered compensation expense (not including the severance charges). Compensation expense increased in both dollars and as a percent of net sales and operating revenues for the quarter and nine months ended September 30, 2006. Additionally, pay plan changes for RadioShack company-operated stores, severance related to our turnaround program and increased headcount in our kiosk operations had a unfavorable impact on compensation expense. We also began the required expensing of stock options as of January 1, 2006, which increased compensation expense. Rent expense increased in both dollars and as a percent of net sales and operating revenues for the quarter and nine months ended September 30, 2006. The rent increases were driven by the addition of 35 kiosks, net, over the past 12 months, as well as by rental payments on our corporate campus. Professional fees decreased in dollars, but remained flat as a percent of net sales and operating revenues for the quarter, while increasing in both dollars and as a percent or net sales and operating revenues for the nine months ended September 30, 2006. The increase relates to the preliminary settlement of certain class action lawsuits and the cost of consultants engaged in various projects.

Depreciation and Amortization

The tables below summarize our depreciation and amortization expense by segment for each reporting period.


	Three Months Ended September 30,
(In millions)	2006		2005		2004
RadioShack company-operated stores	$	14.1	$	13.2	$	12.6
Kiosks		2.8		2.2		—
Other		0.2		0.2		0.1

		17.1		15.6		12.7

Unallocated		14.8		16.1		11.7

Consolidated depreciation and amortization	$	31.9	$	31.7	$	24.4


	Nine Months Ended September 30,
(In millions)	2006		2005		2004
RadioShack company-operated stores	$	43.8	$	38.3	$	37.3
Kiosks		8.3		6.6		—
Other		0.9		0.6		0.5

		53.0		45.5		37.8

Unallocated		44.5		46.1		35.5

Consolidated depreciation and amortization	$	97.5	$	91.6	$	73.3

Impairment of Long-lived Assets

In February 2006, as part of our turnaround program, our board of directors approved the closure of 400 to 700 RadioShack company-operated stores. During the quarter ended June 30, 2006, we identified the stores for closing and subsequently performed the impairment test. Based on the remaining estimated future cash flows

related to these specific stores, it was determined that the net book value of several of the stores’ long-lived assets was not recoverable. For the stores with insufficient estimated cash flows, we wrote down the associated long-lived assets to their estimated fair value, resulting in a $9.2 million impairment loss. As of September 30, 2006, we had closed 481 specific stores.

These impairment charges, aggregating $29.3 million, were recorded within impairment of long-lived assets and other charges in the accompanying 2006 Consolidated Statement of Income.

Net Interest Expense

Consolidated interest expense, net of interest income, for the quarter and nine months ended September 30, 2006, was $8.7 million and $29.4 million, respectively, versus $10.5 million and $25.6 million for the comparable prior year periods.

Interest expense decreased $0.5 million for the quarter, but increased $2.9 million for the nine months ended September 30, 2006, when compared to the corresponding prior year periods. The decrease in the interest expense for the quarter was attributable to lower average outstanding debt, which was partially offset by rising interest rates on our interest rate swap agreements. For the nine months ended September 30, 2006, the increase in interest expense was due to the impact of rising interest rates on our interest rate swap agreements.

Interest income increased $1.3 million for the quarter, but decreased $0.9 million for the nine months ended September 30, 2006, compared to the corresponding prior year periods. These changes were due to lower average investment balances in the first half of the year and higher investment balances in the third quarter.

Other (Loss) Income

For the quarter and nine months ended September 30, 2006, we recognized a loss of $2.5 million and $4.3 million, respectively, relating to our derivative exposure to Sirius Satellite Radio Inc. (“Sirius”) warrants, as a result of the required “mark to market” accounting treatment of these warrants. During the quarter ended March 31, 2005, we sold all rights, title and interest to the “Tandy” trade name within Australia and New Zealand to an affiliate of Dick Smith Electronics, an Australia-based consumer electronics retailer. This transaction resulted in the recognition of $10.2 million in other income during the first nine months of 2005.

Income Tax (Benefit) Provision

The provision for income taxes for each quarterly period reflects our current estimate of the annual effective tax rate for the full year, adjusted by the effect of any unusual or infrequently occurring items within a respective quarter. Our effective tax rates for the quarter and nine months ended September 30, 2006, were approximately (37.5%) and (50.9%), respectively, compared to (38.4%) and 14.4% for the corresponding prior year periods. The fluctuation in the effective tax rate in 2006 was due primarily to the tax benefit associated with inventory donations occurring in the quarter ended June 30, 2006. During the second quarter, we donated approximately $20 million in inventory to charitable organizations in a manner that provided us with a tax deduction in excess of the inventory cost. The entire tax benefit attributable to the donation deduction in excess of inventory cost is reflected in the effective tax rate for the second quarter. The lower effective tax rates in 2005 were due to a favorable non-cash income tax benefit of $56.5 million relating to the release of a tax contingency reserve. This reserve related to losses sustained in connection with our European operations, which were fully dissolved by 1995. The release of the reserve occurred in the third quarter because the statute of limitations governing these issues expired on September 30, 2005.

Recently-Issued Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—A Replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS No. 154”). SFAS No. 154 requires retrospective application to prior periods’ financial statements for a change in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Additionally, retrospective application is not required when explicit transition requirements specific to newly adopted accounting principles exist. Retrospective application requires the cumulative effect of the change on periods prior to those presented to be reflected in the carrying amounts of assets and liabilities as of the beginning of the first period presented, and the offsetting adjustments to be recorded to opening retained earnings. SFAS No. 154 retains the guidance contained in APB Opinion No. 20 for reporting both the correction of an error in previously issued financial statements and a change in accounting estimate. We adopted the provisions of SFAS No. 154, as applicable, at the beginning of fiscal year 2006, and the adoption did not have a material affect on our financial condition or results of operations.

a cumulative-effect adjustment to the opening balance of retained earnings. The provisions of SFAS No. 157 are effective for the fiscal years beginning after November 15, 2007; therefore, we anticipate adopting this standard as of January 1, 2008. We have not determined the effect, if any, the adoption of this statement will have on our financial condition or results of operations.

FINANCIAL CONDITION

Cash Flow – Operating Activities

Cash provided by operating activities for the nine months ended September 30, 2006, was $28.8 million, compared to $22.8 million for the corresponding prior year period. Cash provided by net income plus non-cash adjustments to net income was $138.4 million and $310.7 million for the nine months ended September 30, 2006 and 2005, respectively. The 2006 reduction was due to a decline in operating income in 2006, compared to the prior year. Cash used in working capital components was $109.6 million and $287.9 million for the nine months ended September 30, 2006 and 2005, respectively. This decrease in cash used in working capital components, as compared to the prior year, was primarily the result of changes in inventory and accounts receivable levels, but offset by changes in accounts payable.

Cash Flow – Investing Activities

Cash used in investing activities was $61.6 million and $131.6 million for the nine months ended September 30, 2006 and 2005, respectively. Capital expenditures for these periods related primarily to retail stores and information systems projects. We anticipate that our capital expenditures for 2006 will be approximately $100 million. The majority of these anticipated expenditures relate to RadioShack company-operated store remodels, updated information systems and, to a lesser extent, store relocations. As of September 30, 2006, we had $276.4 million in cash and cash equivalents. These cash and cash equivalents, along with cash generated from our net

sales and operating revenues and, when and if necessary, from our credit facilities, are available to fund future capital expenditure needs and repay debt as it becomes due.

Cash Flow – Financing Activities

Cash provided by financing activities was $85.2 million for the nine months ended September 30, 2006, compared to a cash usage of $281.7 million for the corresponding prior year period. We did not repurchase any shares of our common stock during the nine months ended September 30, 2006, while $647.9 million was used to repurchase shares during the corresponding prior year period. The 2005 stock repurchases were partially funded by $39.9 million received from the sale of treasury stock to employee benefit plans and from stock option exercises. Additionally, our net borrowings were $73.4 million for the nine months ended September 30, 2006, compared to $326.3 million during the corresponding prior year period. These borrowings included commercial paper issued primarily to fund our operations, as a result of our lower cash balances, and outstanding payment obligations. In September 2006, $150 million of long-term debt became due within one year and was included in short-term debt. A corresponding reduction is shown in long-term debt.

Free Cash Flow

Our free cash flow, which we define as cash flows from operating activities less dividends paid and additions to property, plant and equipment was a cash usage of $44.5 million for the nine months ended September 30, 2006, compared to a $101.7 million usage during the corresponding prior year period. This improvement in free cash flow was the result of a decrease in cash used by working capital components, primarily inventory and accounts payable, offset by a decrease in net income.

We believe free cash flow is a relevant indicator of our ability to repay maturing debt, change dividend payments or fund other uses of capital. The comparable financial measure to free cash flow under generally accepted accounting principles is cash flows from operating activities, which provided cash of $28.8 million and $22.8 million for the nine months ended September 30, 2006 and 2005, respectively. We do not intend the presentation of free cash flow, a non-GAAP financial measure, to be considered in isolation or as a substitute for measures prepared in accordance with GAAP.

The following table is a reconciliation of cash provided by operating activities to free cash flow:


	Nine Months Ended September 30,						Year Ended December 31, 2005
(In millions)	2006			2005			Year Ended December 31, 2005
Net cash provided by operating activities	$	28.8		$	22.8		$	362.9
Less:
Additions to property, plant and equipment		73.3			124.5			170.7
Dividends paid		—			—			33.7

Free cash flow	$	(44.5	)	$	(101.7	)	$	158.5

FINANCIAL CONDITION AND CAPITAL STRUCTURE

Debt Ratings: Below are the agencies’ ratings by category, as well as their respective current outlook for the ratings, as of October 20, 2006.


Category	Standard and Poor’s	Moody’s	Fitch
Senior unsecured debt	BBB-	Baa2	BB+
Commercial paper	A-3	P-2	B
Outlook	Negative	Negative	Stable

On February 23, 2006, Fitch changed its long-term rating outlook to negative. In addition, on February 22, 2006, Moody’s placed our ratings under review for a possible downgrade. Both of these actions followed our announcement of calendar 2005 earnings, our turnaround program, and other factors. Moody’s concluded its review of our ratings on March 14, 2006, and reaffirmed our existing short-term rating of P-2, but lowered our long-term rating to Baa2 with a negative outlook. On April 21, 2006, Standard and Poor’s changed our long-term rating to BBB- with a stable outlook and changed our short-term rating to A-3. On July 24, 2006, Standard and Poor’s

lowered our outlook to negative after the release of our second quarter earnings on July 21, 2006. On August 22, 2006, Fitch changed our long-term rating to BB+ with a stable outlook and changed our short-term rating to B.

Factors that can impact our future credit ratings include the effect of our turnaround program, changes in our operating performance, the economic environment, conditions in the retail and consumer electronics industries, our financial position and changes in our business strategy. If further downgrades occur, they will adversely impact, among other things, our future borrowing costs, access to capital markets (including the commercial paper market), vendor financing terms and future new store occupancy costs.

Available Financing

Commercial Paper: As of October 20, 2006, we had reduced access to short-term debt instruments, such as commercial paper issuances, due to recent ratings changes. During our pre-holiday inventory build up, we may utilize both the commercial paper market and our credit facilities to fund our short-term needs. We anticipate that all of the pre-holiday funding, if any, will be repaid by year-end. The amount of commercial paper that can be outstanding is limited to a maximum of the unused portion of our $625 million revolving credit facilities described in more detail below. As of September 30, 2006, we had $50.0 million in commercial paper outstanding. During the third quarter of 2006, the maximum amount of commercial paper we had outstanding at one time was $50.0 million.

Credit Facilities: At September 30, 2006, we had an aggregate of $625 million borrowing capacity available under our existing credit facilities. These facilities consist of the following:


Amount of Facility		Expiration Date
$300 million		June 2009
$325 million		June 2011

These credit facilities support our commercial paper program, as well as provide us a source of liquidity if for any reason the commercial paper market is unavailable to us. As of September 30, 2006, there were no outstanding borrowings under these credit facilities. Our outstanding debt and bank syndicated credit facilities have customary terms and covenants, and we were in compliance with these covenants at September 30, 2006.

In June 2006, we replaced our existing $300 million five-year credit facility expiring June 2007 with a $325 million five-year credit agreement expiring June 2011. The new facility has a more favorable fixed charge coverage ratio, and provides for the exclusion of cash turnaround expenses from the covenant calculation. We also amended the $300 million facility expiring in June 2009 to include the similar covenants and terminated our $130 million 364-day revolving credit facility.

We believe that our present ability to borrow is adequate for our business needs. However, if market conditions change and sales were to dramatically decline or we could not control operating costs, our cash flows and liquidity could be reduced. Additionally, if a scenario as described above occurred, it could cause the rating agencies to lower our credit ratings further, thereby increasing our borrowing costs, or even causing a reduction in or elimination of our access to debt and/or equity markets.

Share Repurchases

In February 2005, our Board of Directors approved a share repurchase program with no expiration date authorizing management to repurchase up to $250 million in open market purchases. We did not repurchase any shares of our common stock for the nine months ended September 30, 2006. As of September 30, 2006, there was $209.9 million available for share repurchases under the $250 million share repurchase program. Repurchases were suspended under the $250 million share repurchase program during the third quarter of 2005 in connection with our overnight share repurchase program of 20 million shares of our common stock. As of October 20, 2006, we have not resumed share repurchases under the $250 million program.

Capitalization

The following table sets forth information about our capitalization at the dates indicated.


	September 30,								December 31, 2005
	2006				2005				December 31, 2005
($ in millions)	Dollars		% of Total Capitalization		Dollars		% of Total Capitalization		Dollars		% of Total Capitalization
Current debt	$	265.3	21.9	%	$	381.7	27.6	%	$	40.9	3.6	%
Long-term debt		344.7	28.5	%		501.6	36.2	%		494.9	44.0	%

Total debt		610.0	50.4	%		883.3	63.8	%		535.8	47.6	%
Stockholders’ equity		600.9	49.6	%		501.5	36.2	%		588.8	52.4	%

Total capitalization	$	1,210.9	100.0	%	$	1,384.8	100.0	%	$	1,124.6	100.0	%

Our debt-to-total capitalization ratio decreased at September 30, 2006, from September 30, 2005, due primarily to the increase in borrowings in 2005 related to our share repurchases, but increased from December 31, 2005, as a result of an increase in equity from September 30, 2005. These changes resulted from the overnight share repurchase program in 2005. Long-term debt as a percentage of total capitalization also increased at December 31, 2005, but decreased at September 30, 2006, from September 30, 2005, due primarily to increased borrowings in 2005 related to our overnight share repurchase.

FINANCIAL IMPACT OF TURNAROUND PROGRAM

As discussed above, our turnaround program contained the following goals:

•

Increase the average unit volume of our RadioShack company-operated store base

•

Rationalize our cost structure

•

Grow profitable square footage in our store portfolio

Regarding the 481 stores we closed during the nine months ended September 30, 2006, we recorded an impairment charge of $9.2 million related to the long-lived assets associated with certain of these stores. We also recognized $1.8 million in accelerated depreciation associated with store assets of the closed stores for which the useful life has been changed due to the store closures. It was determined that the net book value of some of the stores’ long-lived assets was not recoverable based on the remaining estimated future cash flows related to these specific stores.

In connection with these store closures, we identified 601 employees whose positions were terminated by September 30, 2006. All of these employees were paid severance, and some earned retention bonuses if they remained employed to certain agreed-upon dates. The development of a reserve for these costs began on the date that the terms of severance benefits were established and communicated to the employees, and the reserve was recognized over the minimum retention period. As of September 30, 2006, $3.8 million has been recognized as retention and severance benefits for store employees, with $3.5 million in benefits paid to date.

Charleston distribution center. In addition, we incurred a $0.5 million charge related to severance for approximately 100 employees. Additionally, there were $0.3 million in other expenses.

The following table summarizes the activity related to the 2006 turnaround plan from February 17, 2006, through September 30, 2006:


(In millions)	Severance			Leases			Asset Impairments			Accelerated Depreciation			Other			Total
Total charges through June 30, 2006	$	4.3		$	7.8		$	9.2		$	1.2		$	2.0		$	24.5
Total spending through June 30, 2006, net of amounts realized from sale of fixed assets		(0.2	)		(1.0	)		—			—			(1.9	)		(3.1	)
Total non-cash items		—			0.3			(9.2	)		(1.2	)		(0.1	)		(10.2	)
Deferred gain on sale and leaseback of distribution center		—			—			—			—			2.0			2.0

Accrual at June 30, 2006		4.1			7.1			—			—			2.0			13.2

Additional charges in Q3		10.4			4.2			—			0.6			2.8			18.0

Total spending		(9.1	)		(5.5	)		—			—			(2.0	)		(16.6	)

Total non-cash items		—			0.5			—			(0.6	)		—			(0.1	)

Accrual at September 30, 2006	$	5.4		$	6.3		$	—		$	—		$	2.8		$	14.5

FACTORS THAT MAY AFFECT FUTURE RESULTS

Matters discussed in MD&A and in other parts of this report include forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are statements that are not historical and may be identified by the use of words such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “potential” or similar words. These matters include statements concerning management’s plans and objectives relating to our operations or economic performance and related assumptions. We specifically disclaim any duty to update any of the information set forth in this report, including any forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future events and, therefore, involve a number of assumptions, risks and uncertainties, including the risk factors described in Item 1A, “Risk Factors,” of our Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2005. Management cautions that forward-looking statements are not guarantees, and our actual results could differ materially from those expressed or implied in the forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

At September 30, 2006, our derivative instruments that materially increased our exposure to market risks for interest rates, foreign currency rates, commodity prices or other market price risks, were the interest rate swaps noted in our MD&A and warrants we earned to acquire common stock of Sirius. We do not use derivatives for speculative purposes.

Our exposure to interest rate risk results from changes in short-term interest rates. Interest rate risk exists with respect to our net indebtedness at September 30, 2006, of $117.1 million, consisting of short-term debt of $50.0 million and long-term debt of $260.5 million related to our interest rate swaps. The risk is offset by $193.4 million in short-term investments, which effectively bears interest at short-term floating rates. A hypothetical increase of 100 basis points in the interest rate applicable to this floating-rate net exposure would result in an increase in annual net interest expense of $1.2 million. This assumption assumes no change in the net principal balance.

Our exposure to market risk, specifically the equity markets, relates to warrants we earned as of December 31, 2005, to purchase 4 million shares of Sirius stock at an exercise price of $5.00 per share. We recorded these warrants as an asset at year end totaling $6.8 million and have marked this asset to market at September 30, 2006, resulting in a $4.3 million charge in other (loss) income for the nine months ended September 30, 2006. Based on our valuation of these warrants utilizing the Black-Scholes-Merton option pricing model, we could be exposed to further losses due to changes in the underlying Sirius common stock price, as well as changes in volatility and expected exercise date.

The fair value of our fixed rate long-term debt is sensitive to interest rate changes, which would result in increases or decreases in the fair value of our debt due to differences between market interest rates and rates in effect at the inception of our debt obligation. Regarding the fair value of our fixed rate debt, changes in interest rates have no impact on our consolidated financial statements.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We have established a system of disclosure controls and procedures that are designed to ensure that material information relating to the Company, which is required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, in a timely fashion. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) was performed as of the end of the period covered by this quarterly report. This evaluation was performed under the supervision and with the participation of management, including our CEO and CFO.

Based upon that evaluation, our CEO and CFO have concluded that these disclosure controls and procedures were effective.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are currently a party to various class action lawsuits alleging that we misclassified certain RadioShack store managers as exempt from overtime in violation of the Fair Labor Standards Act or similar state laws, including a lawsuit styled Alphonse L. Perez, et al. v. RadioShack Corporation, filed on October 31, 2002, in the United States District Court for the Northern District of Illinois. We have reached a tentative settlement agreement with counsel for the Perez plaintiffs and four other wage-hour lawsuits pending against us. This global settlement would result in a payment by us of approximately $8.8 million, in the aggregate, to resolve all five of the pending lawsuits. Of this amount, a charge of $8.5 million was recognized during the quarter ended June 30, 2006, with the balance recognized during the quarter ended September 30, 2006. The respective courts will need to approve the tentative settlement. We anticipate the settlement will ultimately be approved by each court. If, however, a final settlement cannot be reached, we nevertheless believe we have meritorious defenses, and in such event we would continue to vigorously defend these cases.

ITEM 1A. RISK FACTORS.

Our Annual Report on Form 10-K for the year ended December 31, 2005, as well as our Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, include a detailed discussion of our risk factors. The risks described in our Form 10-K and Form 10-Q are not the only risks facing RadioShack. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table sets forth information concerning purchases made by or on behalf of RadioShack or any affiliated purchaser (as defined in the SEC’s rules) of RadioShack common stock for the periods indicated.

PURCHASES OF EQUITY SECURITIES BY RADIOSHACK


	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ⁽²⁾
July 1 – 31, 2006	—	$	—	—	$	209,909,275
August 1 – 31, 2006	—	$	—	—	$	209,909,275
September 1 – 30, 2006	—	$	—	—	$	209,909,275

Total	—	$	—	—

⁽¹⁾	The total number of shares purchased would include all repurchases made during the periods indicated. In July, August and September of 2006, however, no shares were repurchased through a publicly announced plan or program in open-market transactions.

⁽²⁾

These publicly announced plans or programs consist of RadioShack’s $250 million share repurchase program, which was announced on March 16, 2005, and has no expiration date. On August 5, 2005, we suspended purchases under the $250 million share repurchase program during the period in which a financial institution purchased shares pursuant to an overnight share repurchase program. As of October 20, 2006, management had not determined if share repurchases under the $250 million program for 2006 should be resumed.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

A list of the exhibits required by Item 601 of Regulation S-K and filed as part of this report is set forth in the Index to Exhibits on page 32, which immediately precedes such exhibits.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		RadioShack Corporation
		(Registrant)

Date: October 25, 2006	By	/s/ David P. Johnson
		David P. Johnson
		Senior Vice President – Corporate Controller
		(Authorized Officer)

Date: October 25, 2006		/s/ James F. Gooch
		James F. Gooch
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)

RADIOSHACK CORPORATION

INDEX TO EXHIBITS


Exhibit Number		Description
3.1		Certificate of Amendment of Restated Certificate of Incorporation dated May 18, 2000 (filed as Exhibit 3a to RadioShack’s Form 10-Q filed on August 11, 2000, for the fiscal quarter ended June 30, 2000, and incorporated herein by reference).

3.2		Restated Certificate of Incorporation of RadioShack Corporation dated July 26, 1999 (filed as Exhibit 3a(i) to RadioShack’s Form 10-Q filed on August 11, 1999, for the fiscal quarter ended June 30, 1999, and incorporated herein by reference).

3.3		RadioShack Corporation Bylaws, amended and restated as of September 29, 2005 (filed as Exhibit 3.1 to RadioShack’s Form 8-K filed on September 30, 2005, and incorporated herein by reference).

10.1		Letter Agreement, dated July 6, 2006, between RadioShack Corporation and Julian C. Day (filed as Exhibit 10.1 to RadioShack’s Form 8-K filed on July 7, 2006, and incorporated herein by reference).

10.2		Incentive Stock Plan Non-Qualified Stock Option Agreement under the 1997 Incentive Stock Plan, dated July 6, 2006, between RadioShack Corporation and Julian C. Day (filed as Exhibit 10.2 to RadioShack’s Form 8-K filed on July 7, 2006, and incorporated herein by reference).

10.3		Incentive Stock Plan Non-Qualified Stock Option Agreement under the 1999 Incentive Stock Plan, dated July 6, 2006, between RadioShack Corporation and Julian C. Day (filed as Exhibit 10.3 to RadioShack’s Form 8-K filed on July 7, 2006, and incorporated herein by reference).

10.4		Incentive Stock Plan Non-Qualified Stock Option Agreement under the 2001 Incentive Stock Plan, dated July 6, 2006, between RadioShack Corporation and Julian C. Day (filed as Exhibit 10.4 to RadioShack’s Form 8-K filed on July 7, 2006, and incorporated herein by reference).

10.5		Incentive Stock Plan Non-Qualified Stock Option Agreement, dated July 6, 2006, between RadioShack Corporation and Julian C. Day (filed as Exhibit 10.5 to RadioShack’s Form 8-K filed on July 7, 2006, and incorporated herein by reference).

10.6		Incentive Stock Plan Non-Qualified Stock Option Agreement, dated July 6, 2006, between RadioShack Corporation and Julian C. Day (filed as Exhibit 10.6 to RadioShack’s Form 8-K filed on July 7, 2006, and incorporated herein by reference).

10.7		Agreement on Nonsolicitation, Confidentiality, Noncompetition and Intellectual Property, dated July 6, 2006, between RadioShack Corporation and Julian C. Day (filed as Exhibit 10.7 to RadioShack’s Form 8-K filed on July 7, 2006, and incorporated herein by reference).

10.8*		Employment Offer Letter to James F. Gooch from RadioShack Corporation, dated July 27, 2006.

10.9*		RadioShack Corporation Officers’ Severance Program.

10.10*		RadioShack Amended and Restated Termination Protection Plan (Level I).



31(a)*		Rule 13a-14(a) Certification of the Chief Executive Officer of RadioShack Corporation.

31(b)*		Rule 13a-14(a) Certification of the Chief Financial Officer of RadioShack Corporation.

32*		Section 1350 Certifications.**

*	Filed with this report

These Certifications shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, as amended, or otherwise subject to the liability of that section. These Certifications shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates them by reference.

EX-10.8 2 dex108.htm EMPLOYMENT OFFER LETTER TO JAMES F. GOOCH FROM RADIOSHACK CORPORATION Employment Offer Letter to James F. Gooch from RadioShack Corporation

Exhibit 10.8

[RadioShack Corporation Letterhead]


				300 RadioShack Circle
				Fort Worth, Texas 76102
				(817) 415-3011

July 27, 2006

James Gooch

275 Abbey Street

Birmingham, MI 48009

Dear Jim:

We value your talent and expertise and hope you’ll join us in our journey to become the best. It is our pleasure to extend an offer to you to join the RadioShack team as Chief Financial Officer. The specifics of this employment offer are set forth below.


Base Salary		$16,346.15 bi-weekly ($425,000.00 annualized)

Sign-On		The Company will provide you with a sign-on bonus of cash in the amount of $50,000.

		In addition you will receive 15,000 shares of restricted stock upon joining RadioShack. This grant of restricted stock is subject to the approval of the Board of Directors at their next scheduled meeting.

Target Bonus		You will be eligible for an annual bonus based on the performance of the Company and you, as follows:

		$318,750 Annual Incentive Target (75% of base salary), prorated from your first day of employment through December 31, 2006.

		For 2006 (bonus paid in 2007), we agree to guarantee a bonus of $175,000.

Stock Options		Grant to purchase 225,000 shares of RadioShack Corporation Common Stock, which will vest over four years.

		This grant is also subject to approval of the Board of Directors at their next scheduled meeting.

Vacation		4 weeks vacation each employment anniversary year
		5 weeks vacation after 20 years of continuous employment

Relocation		The Company will provide you with relocation assistance. This will include packing/unpacking and shipping of your household goods and a furnished temporary apartment through August 15, 2007 and will pay for a suitable number of trips back and forth to your Michigan residence. We will also assist in the sale of your current home through our Home Marketing Assistance and Appraised Value / Amended Value Program with our relocation provider.

July 27, 2006

Mr. James Gooch

Page 2


Health & Welfare Plans		You will be eligible for the basic group medical, dental, vision, life, AD&D, disability, and flexible reimbursement plans 3 months following your first day of employment. You will receive a complete packet of information and enrollment forms shortly after you have reported for work. During the eligibility period, the Company will reimburse your COBRA cost.

401(k) Plan		This plan is a qualified retirement plan with various investment options, which allows participants to make a pre-tax contribution and receive a matching contribution from the company of $1 for $1 up to a 4% contribution level that vests immediately. A complete set of enrollment materials will be provided closer to your eligibility date.

Stock Ownership		Our shareholders and the investment community often analyze and measure the commitment of management to the company through share ownership. With this in mind, our Board of Directors adopted an ownership policy for all officers. At your level of compensation you will be required to own RadioShack Corporation common stock having a value equal to 225% of your base salary. A review to determine compliance with this policy will occur as of each December 31. You are not expected to reach this level immediately.

Other benefits for which you will also be eligible after Board approval include a Termination Protection Agreement, the Officers’ Supplemental Executive Retirement Plan, Executive Deferred Cash and Stock Plans, Officers’ Severance Program, Annual Executive Physicals, and Executive Life. In addition you will be eligible to participate in our Long Term Incentive Plan beginning in 2007. More detailed information about each of these benefits will be covered during your new employee executive orientation.

RadioShack Corporation and its team members maintain an employment relationship that is “at-will” Either you or the Company may terminate the relationship at any time, with or without cause, and there is no agreement, expressed or implied, with you and the Company for any specific period of employment or for continuing or long-term employment. This policy may only be modified by a separate written document, signed by you and the chief executive officer of RadioShack Corporation. Also, the Company reserves the right to modify the compensation and benefit plans contained in this letter from year to year without legal consideration or notice.

This is a very exciting time to join RadioShack Corporation. It is my hope that after accepting this employment offer, you will be available to report for work no later than August 16, 2006. Please sign and date this letter and return to me at your earliest convenience. To expedite your reply, you can fax the signed copy to 817-415-2647. If you have any questions, do not hesitate to call me at 817-415-2180.

Welcome to RadioShack Corporation!

Sincerely,

/s/ Julian C. Day

Julian C. Day

Chairman and Chief Executive Officer

Accepted:


/s/ James Gooch		July 27, 2006
James Gooch		Date

EX-10.9 3 dex109.htm RADIOSHACK CORPORATION OFFICERS' SEVERANCE PROGRAM RadioShack Corporation Officers' Severance Program

Exhibit 10.9

RADIOSHACK CORPORATION

OFFICERS’ SEVERANCE PROGRAM

1. PURPOSE OF PROGRAM. The purpose of the RadioShack Corporation Officers’ Severance Program (the “Program”) is to retain well-qualified individuals as officers of RadioShack Corporation, and to provide a benefit to each such individual if his/her employment is terminated prior to the third anniversary of the Effective Date (as defined below), under qualifying circumstances. The Program is intended to qualify as a “top-hat” plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), in that it is intended to be an “employee benefit plan” (as such term is defined under Section 3(3) of ERISA) which is unfunded and provides benefits only to a select group of management or highly compensated employees of the Company and/or its Subsidiaries.

2. DEFINITIONS. The following terms shall have the following meanings unless the context indicates otherwise:

(a) “Applicable Benefits Schedule” with respect to a Participant shall mean the Benefits Schedule applicable to the Participant based on his or her position with the Company and/or its Subsidiaries.

(b) “Beneficiary” The Participant’s estate shall be deemed to be the Participant’s designated Beneficiary.

(c) “Benefits Schedule” shall mean a separate Benefits Schedule, if any, adopted as part of the Program, which Schedule sets forth certain provisions relating to the determination of eligibility for and/or the amount of Severance Benefits payable under the Program.

(d) “Board” shall mean the Board of Directors of the Company.

(e) “Cause” means (i) the Participant is convicted of a felony or of any crime involving moral turpitude, dishonesty, fraud, theft or financial impropriety; or (ii) a reasonable determination by the Committee that, (A) the Participant has willfully and continuously failed to perform his/her duties (other than such failure resulting from incapacity due to physical or mental illness), after a written demand for corrected performance is delivered to the Participant which specifically identifies the manner(s) in which the Participant has not performed his/her duties, (B) the Participant has engaged in illegal conduct, an act of dishonesty, moral turpitude, dishonesty, fraud, theft, financial impropriety or gross misconduct injurious to the Company, or (C) the Participant has violated a material provision of the Company’s Code of Ethics, Financial Code of Ethics, or Participant’s fiduciary duty to the Company.

(f) “Code” means the Internal Revenue Code of 1986, as amended.

(g) “Committee” shall mean (i) the Board or (ii) a committee or subcommittee of the Board as from time to time appointed by the Board from among its members. The initial

Committee shall be the Board’s Management Development and Compensation Committee. In the absence of an appointed Committee, the Board shall function as the Committee under the Program.

(h) “Company” shall mean RadioShack Corporation, a Delaware corporation, including any successor entity or any successor to the assets or business of the Company. “Company” shall not mean a Subsidiary or Subsidiaries which employ[s] a Participant, unless the specific Subsidiary is expressly named in the Participant’s applicable Benefits Schedule.

(i) “CIC Agreement” shall include any termination protection agreement entered into by the Company and a Participant and the Company’s Termination Protection Plan Level I by which a Participant may be covered.

(j) “Effective Date” shall mean May 18, 2006.

(k) “ERISA” shall have the meaning ascribed to such term in Section 1.

(l) [RESERVED]

(m) “Good Reason” shall have the meaning ascribed to such term in a Participant’s Applicable Benefits Schedule if said schedule contains a definition of, and thus a right to terminate for, Good Reason.

(n) “Participant(s)” shall have the meaning set forth in Section 3.

(o) “Payroll Date” shall mean each regularly scheduled date during Participant’s employment on which base salary payments are made and after a Termination Date, each regularly scheduled date on which such payments would be made if employment continued.

(p) “Program” shall have the meaning ascribed to such term in Section 1.

(q) “Qualifying Termination” shall mean (i) involuntary termination by the Company of the employment of the Participant with the Company and all of its Subsidiaries for any reason other than death, disability or Cause, or (ii) resignation of the Participant for Good Reason if such Participant’s Applicable Benefits Schedule contains a right to terminate for Good Reason.

(r) “Reference Base Salary” with respect to a Participant means the annual base salary of such Participant as in effect immediately prior to the Termination Date (determined without regard to any reduction which would constitute a basis for a Participant’s resignation for Good Reason, if such Participant’s Applicable Benefits Schedule contains such a right to terminate for Good Reason).

(s) “Retention Period” shall mean the period beginning on the Effective Date and ending on the third anniversary of the Effective Date.

(t) “Severance Benefits” shall mean the compensation and benefits provided to a Terminated Participant pursuant to Sections 5 and 6 of the Program.

(u) “Severance Period” shall mean the number of months a specific Terminated Participant is entitled to receive Severance Benefits, which period shall be expressly provided for by the Committee with respect to the Participant’s participation herein and set forth on the Applicable Benefits Schedule.

(v) “Subsidiary” shall mean a corporation of which the Company directly or indirectly owns more than fifty percent (50%) of the “voting stock” (meaning the capital stock of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation) or any other business entity in which the Company directly or indirectly has an ownership interest of more than fifty percent (50%).

(w) “Terminated Participant” shall mean a Participant whose employment with the Company and/or a Subsidiary has been terminated under circumstances constituting a Qualifying Termination as described in Section 5 below.

(x) “Termination Date” shall mean the date a Terminated Participant’s employment with the Company and/or a Subsidiary is terminated as described in Section 5 below.

(y) “Vested Benefits” shall mean any base salary or prior year’s bonus or incentive compensation earned but unpaid prior to the Termination Date (other than as a result of deferral made at the Participant’s election) and any amounts which are or become vested or which the Participant is otherwise entitled to under the terms of any plan, policy, practice or program of, or any contract or agreement with, the Company or any Subsidiary, at or subsequent to the Termination Date without regard to the performance of further services by the Participant or the resolution of a contingency; provided that the Program shall in no event be deemed to modify, alter or amend the terms of any such plan, policy, practice or program of, or any contract or agreement with, the Company or any Subsidiary.

3. PARTICIPATION. All executive officers, senior vice presidents, vice presidents, Assistant Secretaries and Assistant Treasurers of the Company (collectively, the “Participants”) shall participate in the Program. Benefits Schedule I shall apply only to the Chief Executive Officer of the Company. Benefits Schedule II shall apply only to the executive officers of the Company (other than the Chief Executive Officer of the Company). Benefits Schedule III shall apply only to the senior vice presidents of the Company. Benefits Schedule IV shall apply to the vice presidents, Assistant Secretaries and Assistant Treasurers of the Company.

4. ADMINISTRATION.

(a) Responsibility. The Committee shall have the responsibility, in its sole discretion, to control, operate, manage and administer the Program in accordance with its terms.

(b) Authority of the Committee. The Committee shall have the maximum discretionary authority permitted by law that may be necessary to enable it to discharge its responsibilities with respect to the Program, including but not limited to the following:

(i) to determine eligibility for participation in the Program;

(ii) to establish the terms and provisions of, and to adopt as part of the Program, one or more Benefits Schedules setting forth, among other things, the Severance Period and such other terms and provisions as the Committee shall determine;

(iii) to calculate a Participant’s Severance Benefits;

(iv) to correct any defect, supply any omission, or reconcile any inconsistency in the Program in such manner and to such extent as it shall deem appropriate in its sole discretion to carry the same into effect;

(v) to issue administrative guidelines as an aid to administer the Program and make changes in such guidelines as it from time to time deems proper;

(vi) to make rules for carrying out and administering the Program and make changes in such rules as it from time to time deems proper;

(vii) to the extent permitted under the Program, grant waivers of Program terms, conditions, restrictions, and limitations;

(viii) to construe and interpret the Program and make reasonable determinations as to a Participant’s eligibility for benefits under the Program, including determinations as to Qualifying Termination and disability; and

(ix) to take any and all other actions it deems necessary or advisable for the proper operation or administration of the Program.

(c) Action by the Committee. Except as may otherwise be required or permitted under an applicable charter, the Committee may (i) act only by a majority of its members (provided that any determination of the Committee may be made, without a meeting, by a writing or writings signed by all of the members of the Committee), and (ii) may authorize any one or more of its members to execute and deliver documents on behalf of the Committee.

(d) Delegation of Authority. The Committee has delegated administrative duties to the Company. In addition, the Committee, or any person to whom it has delegated duties as aforesaid, may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Program. The Committee may employ such legal or other counsel, consultants and agents as it may deem desirable for the administration of the Program and may rely upon any opinion or computation received from any such counsel, consultant or agent. Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by the Company, or the Subsidiary whose employees have benefited from the Program, as determined by the Committee.

(e) Determinations and Interpretations by the Committee. All determinations and interpretations made by the Committee or by its delegates shall be binding and conclusive to the maximum extent permitted by law on all Participants and their heirs, successors, and legal representatives.

(f) Information. The Company shall furnish to the Committee in writing all information the Committee may deem appropriate for the exercise of its powers and duties in the administration of the Program. Such information may include, but shall not be limited to, the full names of all Participants, their earnings and their dates of birth, employment, retirement, death or other termination of employment. Such information shall be conclusive for all purposes of the Program, and the Committee shall be entitled to rely thereon without any investigation thereof.

(g) Self-Interest. No member of the Committee may act, vote or otherwise influence a decision of the Committee specifically relating to his/her benefits, if any, under the Program.

5. TERMINATION OF EMPLOYMENT. If the employment of a Participant is terminated during the Retention Period in circumstances constituting a Qualifying Termination, such Terminated Participant shall be entitled to receive Severance Benefits in accordance with Section 6 below.

6. SEVERANCE BENEFITS. In the event a Participant is entitled to receive Severance Benefits pursuant to Section 5 above, the Terminated Participant shall receive a payment equal to the Severance Benefits determined in accordance with the Applicable Benefits Schedule.

7. PARTICIPANT COVENANTS. As a condition to receiving the right to participate in the Program and any benefits hereunder, each Participant shall enter into an agreement with the Company, providing for confidentiality and nonsolicitation obligations.

8. CLAIMS.

(a) Claims Procedure. If any Participant or Beneficiary, or their legal representative, has a claim for benefits which is not being paid, such claimant may file a written claim with the Committee setting forth the amount and nature of the claim, supporting facts, and the claimant’s address. A claimant must file any such claim within sixty (60) days after a Participant’s Termination Date. Written notice of the disposition of a claim by the Committee shall be furnished to the claimant within ninety (90) days after the claim is filed. In the event of special circumstances, the Committee may extend the period for determination for up to an additional ninety (90) days, in which case it shall so advise the claimant. If the claim is denied, the reasons for the denial shall be specifically set forth in writing, pertinent provisions of the Program shall be cited, including an explanation of the Program’s claim review procedure, and, if the claim is perfectible, an explanation as to how the claimant can perfect the claim shall be provided.

(b) Claims Review Procedure. If a claimant whose claim has been denied wishes further consideration of his/her claim, he/she may request the Committee to review his/her claim in a written statement of the claimant’s position filed with the Committee no later than sixty (60) days after receipt of the written notification provided for in Section 8(a) above. The Committee shall fully and fairly review the matter and shall promptly advise the claimant, in

writing, of its decision within the next sixty (60) days. Due to special circumstances, the Committee may extend the period for determination for up to an additional sixty (60) days.

9. TAXES.

(a) Withholding Taxes. The Company shall be entitled to withhold from any and all payments made to a Participant under the Program all federal, state, local and/or other taxes or imposts which the Company determines are required to be so withheld from such payments or by reason of any other payments made to or on behalf of the Participant or for his/her benefit hereunder.

(b) No Guarantee of Tax Consequences. No person connected with the Program in any capacity, including, but not limited to, the Company and any Subsidiary and their directors, officers, agents and employees makes any representation, commitment, or guarantee that any tax treatment, including, but not limited to, federal, state and local income, estate and gift tax treatment, will be applicable with respect to amounts deferred under the Program, or paid to or for the benefit of a Participant under the Program, or that such tax treatment will apply to or be available to a Participant on account of participation in the Program.

10. TERM OF PROGRAM. The Program shall be effective as of the Effective Date and shall remain in effect until the Board terminates the Program in accordance with Section 11(b) below.

11. AMENDMENT AND TERMINATION.

(a) Amendment of Program. The Program may be amended by the Board at any time with or without prior notice; provided, however, that any amendment of the Program during the thirty six (36)-month period immediately following the Effective Date which is less favorable to a Participant shall not be effective as to such Participant unless the Participant shall have consented thereto in writing.

(b) Termination of Program. The Program may be terminated or suspended by the Board at any time with or without prior notice; provided, however, that any termination or suspension to be effective during the thirty six (36)-month period immediately following the Effective Date shall not be effective with respect to any Participant unless such Participant shall have consented thereto in writing.

(c) No Adverse Affect. If the Program is amended, terminated, or suspended in accordance with Section 11(a) or 11(b) above, such action shall not adversely affect the benefits under the Program to which any Terminated Participant (as of the date of amendment, termination or suspension) is entitled.

(d) Code Section 409A. It is intended that this Program and the Committee’s exercise of authority or discretion hereunder shall comply with the provisions of Code Section 409A and the treasury regulations relating thereto so as not to subject a Participant to the payment of interest and tax penalty which may be imposed under Code Section 409A. In furtherance of this interest, to the extent that any regulations or other guidance issued under Code Section 409A after the Effective Date would result in a Participant being subject to payment of

interest and tax penalty under Code Section 409A, the Committee may amend this Program, including with respect to the timing of payment of benefits, in order to avoid the application of Code Section 409A.

12. MISCELLANEOUS.

(a) Offset. Severance Benefits shall be reduced by any severance or similar payment or benefit made or provided by the Company or any Subsidiary to the Participant pursuant to (i) any severance plan, program, policy or similar arrangement of the Company or any Subsidiary of the Company (including without limitation the CIC Agreement), (ii) any employment agreement between the Company or any Subsidiary and the Participant, and (iii) any federal, state or local statute, rule, regulation or ordinance. For avoidance of doubt, (A) any payment or benefit which is a Vested Benefit shall not be considered a severance or similar payment or benefit under this Section 12(a), and (B) the Program is not intended to, and shall not, result in any duplication of payments or benefits to any Participant.

(b) No Right, Title, or Interest in Company Assets. Participants shall have no right, title, or interest whatsoever in or to any assets of the Company or any investments that the Company may make to aid it in meeting its obligations under the Program. Nothing contained in the Program, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, Beneficiary, legal representative or any other person. To the extent that any person acquires a right to receive payments from the Company under the Program, such right shall be no greater than the right of an unsecured general creditor of the Company. Subject to this Section 12(b), all payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts.

(c) No Right to Continued Employment. The Participant’s rights, if any, to continue to serve the Company as an employee shall not be enlarged or otherwise affected by his/her designation as a Participant under the Program, and the Company or the applicable Subsidiary reserves the right to terminate the employment of any employee at any time. The adoption of the Program shall not be deemed to give any employee, or any other individual any right to be selected as a Participant or to continued employment with the Company or any Subsidiary.

(d) Other Rights. The Program shall not affect or impair the rights or obligations of the Company or a Participant under any other written plan, contract, arrangement, or pension, profit sharing or other compensation plan.

(e) Governing Law. The Program shall be governed by and construed in accordance with the laws of the State of Texas without reference to principles of conflict of laws, except as superseded by applicable federal law (including, without limitation, ERISA).

(f) Severability. If any term or condition of the Program shall be invalid or unenforceable to any extent or in any application, then the remainder of the Program, with the exception of such invalid or unenforceable provision (but only to the extent that such term or

condition cannot be appropriately reformed or modified), shall not be affected thereby and shall continue in effect and application to its fullest extent.

(g) Incapacity. If the Committee determines that a Participant is unable to care for his/her affairs because of illness or accident or because he or she is a minor, any benefit due the Participant may be paid to the Participant’s spouse or to any other person deemed by the Committee to have incurred expense for such Participant (including a duly appointed guardian, committee or other legal representative), and any such payment shall be a complete discharge of the Company’s obligation hereunder.

(h) Transferability of Rights. The Company shall have the unrestricted right to transfer its obligations under the Program with respect to one or more Participants to any person, including, but not limited to, any purchaser of all or any part of the Company’s assets or business. No Participant or Beneficiary shall have any right to commute, encumber, transfer or otherwise dispose of or alienate any present or future right or expectancy which the Participant or Beneficiary may have at any time to receive payments of benefits hereunder, which benefits and the right thereto are expressly declared to be non-assignable and nontransferable, except to the extent required by law. Any attempt to transfer or assign a benefit, or any rights granted hereunder, by a Participant or the spouse of a Participant shall, in the sole discretion of the Committee (after consideration of such facts as it deems pertinent), be grounds for terminating any rights of the Participant or Beneficiary to any portion of the Program benefits not previously paid.

(i) Interest. In the event any payment to a Participant under the Program is not paid within thirty (30) days after it is due and Participant notifies the Company and the Company fails to make such payment (to the extent such payment is undisputed), such payment shall thereafter bear interest at the prime rate from time to time as published in The Wall Street Journal, Midwest Edition.

(j) No Obligation to Mitigate Damages. The Participants shall not be obligated to seek other employment in mitigation of amounts payable or arrangements made under the provisions of the Program and the obtaining of any such other employment shall in no event effect any reduction of the Company’s obligations under the Program.

(k) Forum. Any suit brought under the Program shall be brought in the federal court for Tarrant County, Texas.

(l) Condition Precedent to Receipt of Payments or Benefits under the Program. A Terminated Participant will not be eligible to receive Severance Benefits or any other payments or benefits under the Program until (i) such Terminated Participant executes a confidentiality, nonsolicitation and general release agreement (the “Agreement”) containing, among other items, a general release of all claims arising out of said Participant’s employment with, and termination of employment from, the Company in substantially the form attached hereto as Exhibit A (adjusted as necessary to conform to then existing legal requirements); and (ii) the revocation period specified in the Agreement expires without such Terminated Participant exercising his/her right of revocation as set forth in the Agreement.

(m) Assumption by Successor to the Company. The Company shall cause any successor to its business or assets to assume this Program and the obligations arising hereunder and to maintain this Program without modification or alteration for the period required herein.

BENEFITS SCHEDULE - I

(CEO)


Participant		Company’s Chief Executive Officer

Severance Period (applicable during Retention Period)		18 months, plus an additional 1 month per completed year of service with the Company and/or its Subsidiaries, up to a maximum Severance Period of 24 months

Outplacement Assistance		A 1 year program of outplacement assistance selected by the Company in its discretion

Additional Definition

“Good Reason” shall mean:

(a) any significant adverse reduction in the Participant’s annual cash compensation opportunity expressed in terms of base salary and target annual bonus which is in effect immediately prior to the Effective Date (and as increased from time to time thereafter), except as part of a general reduction in the total compensation opportunities of the Company’s senior executives; for purposes of this definition of Good Reason, a “significant adverse reduction” shall solely mean a reduction of the Participant’s annual cash compensation opportunity by at least ten percent (10%) taken at one time or cumulatively after the Effective Date; or

(b) the material reduction or material adverse modification of the Participant’s authority or duties, such as a substantial diminution or adverse modification in the Participant’s status or responsibilities, from his/her authorities being exercised and duties being performed by the Participant immediately prior to the Effective Date (and as such authorities and duties may be increased from time to time after the Effective Date).

Notwithstanding the foregoing, any of the circumstances described above may not serve as a basis for resignation for “Good Reason” by the Participant unless the Participant has provided written notice to the Company that such circumstance exists within thirty (30) days of the Participant’s learning of such circumstance and the Company has failed to cure such circumstance within thirty (30) days following such notice; and provided further, the Participant did not previously consent to the action leading to his/her claim of resignation for “Good Reason.”

I-1

Severance Benefits

If, during the Retention Period, Participant’s employment with the Company shall terminate under circumstances described in Section 5, Participant shall receive the following Severance Benefits:

(a) The Company agrees to pay Participant severance pay in the form of salary continuation for the Severance Period determined using Participant’s then-current base salary (disregarding any reduction constituting Good Reason);

(b) The Company agrees to provide the Participant for 1 year (the “Outplacement Period”) from the Participant’s last date of employment an outplacement program selected by the Company in its discretion; and

(c) The Company agrees to pay Participant the monthly premium under the Company’s health and welfare plans then in effect for coverage obtained thereunder pursuant to Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for the Outplacement Period in lieu of continuing employee benefits and/or perquisites. Said amount shall be paid regardless of whether Participant maintains COBRA coverage.

Payments and assistance relating to (a), (b) and (c) will begin on the Company’s next Payroll Date which is at least eight days following the later of the effective date of the General Release or the date the General Release is received by the Vice President – Compensation and Benefits of the Company on behalf of the Company (or such later date as may be required under Code Section 409A). The first payment, however, will be retroactive to the day following Participant’s last day of employment.

In the event of death, all Severance Benefits (other than the value of outplacement assistance), that have become payable prior to the date of death shall be paid to the Participant’s Beneficiary.

Notwithstanding anything contained in the Program to the contrary, the Company shall pay all Vested Benefits to a Terminated Participant as soon as practicable following the Termination Date (or such later date as may be required under Code Section 409A); provided that any Vested Benefits attributable to a plan, policy practice, program, contract or agreement shall be payable in accordance with the terms thereof under which the amounts have accrued.

Notwithstanding anything contained in the Program to the contrary, the Company or the Committee may, in its sole discretion provide benefits in addition to the benefits described under this Benefit Schedule, which benefits may, but are not required to be, uniform among Participants.

I-2

BENEFITS SCHEDULE II

(Executive Vice President Group)


Participant		Executive Vice Presidents of the Company

Severance Period (applicable during Retention Period)		18 months, plus an additional 1 month per completed year of service with the Company and/or its Subsidiaries, up to a maximum Severance Period of 24 months

Outplacement Assistance		A 1 year program of outplacement assistance selected by the Company in its discretion

Additional Definition

“Good Reason” shall mean:

(b) the material reduction of the Participant’s authority or duties, such as a substantial diminution in the Participant’s status or responsibilities, from his/her authorities being exercised and duties being performed by the Participant immediately prior to the Effective Date (and as such authorities and duties may be increased due to promotions from time to time after the Effective Date).

II-1

Severance Benefits

If, during the Retention Period, Participant’s employment with the Company shall terminate under circumstances described in Section 5, Participant shall receive the following Severance Benefits:

In the event of death, all Severance Benefits (other than the value of outplacement assistance), that have become payable prior to the date of death shall be paid to the Participant’s Beneficiary.

II-2

BENEFITS SCHEDULE III

(Senior Vice President Group)


Participant		Senior Vice Presidents of the Company

Severance Period (applicable during Retention Period)		12 months, plus an additional 2 weeks per completed year of service with the Company and/or its Subsidiaries, up to a maximum Severance Period of 18 months

Outplacement Assistance		A 9 month program of outplacement assistance selected by the Company in its discretion

Additional Definition

“Good Reason” shall mean any significant adverse reduction in the Participant’s annual cash compensation opportunity expressed in terms of base salary and target annual bonus which is in effect immediately prior to the Effective Date (and as increased from time to time thereafter), except as part of a general reduction in the total compensation opportunities of the Company’s senior executives; for purposes of this definition of Good Reason, a “significant adverse reduction” shall solely mean a reduction to a position grade below the position grade applicable to the Participant immediately prior to the Effective Date.

Severance Benefits

If, during the Retention Period, Participant’s employment with the Company shall terminate under circumstances described in Section 5, Participant shall receive the following Severance Benefits:

III-1

(b) The Company agrees to provide the Participant for 9 months (the “Outplacement Period”) from the Participant’s last date of employment an outplacement program selected by the Company in its discretion; and

In the event of death, all Severance Benefits (other than the value of outplacement assistance), that have become payable prior to the date of death shall be paid to the Participant’s Beneficiary.

III-2

BENEFITS SCHEDULE IV

(Vice President Group, Assistant Secretary and Assistant Treasurer)


Participant		Vice Presidents, Assistant Secretaries and Assistant Treasurers of the Company

Severance Period (applicable during Retention Period)		6 months, plus an additional 2 weeks per completed year of service with the Company and/or its Subsidiaries, up to a maximum Severance Period of 12 months

Outplacement Assistance		A 6 month program of outplacement assistance selected by the Company in its discretion

Additional Definition

Severance Benefits

If, during the Retention Period, Participant’s employment with the Company shall terminate under circumstances described in Section 5, Participant shall receive the following Severance Benefits:

IV-1

(b) The Company agrees to provide the Participant for 6 months (the “Outplacement Period”) from the Participant’s last date of employment an outplacement program selected by the Company in its discretion; and

In the event of death, all Severance Benefits (other than the value of outplacement assistance), that have become payable prior to the date of death shall be paid to the Participant’s Beneficiary.

IV-2

EX-10.10 4 dex1010.htm RADIOSHACK AMENDED AND RESTATED TERMINATION PROTECTION PLAN RadioShack Amended and Restated Termination Protection Plan

Exhibit 10.10

RADIOSHACK CORPORATION

AMENDED AND RESTATED TERMINATION PROTECTION PLAN

“LEVEL I”

WHEREAS, the “Board” of the “Company” (as those terms are hereinafter defined) recognizes that the possibility of a future “Change in Control” (as hereinafter defined) exists and that the threat or occurrence of a Change in Control could result in significant distractions to its officers because of the uncertainties inherent in such a situation; and

WHEREAS, the Board has determined that it is essential and in the best interest of the Company, its stockholders and the Employer to retain the services of its officers in the event of a threat or the occurrence of a Change in Control of the Company and to ensure their continued dedication and efforts in such event without undue concern for their employment and personal financial security.

NOW, THEREFORE, in order to fulfill these purposes, the following is hereby adopted.

ARTICLE I

ESTABLISHMENT OF PLAN

1.1 As of the Effective Date, the Company hereby amends and restates the RadioShack Corporation Termination Protection Plan Level I in its entirety as set forth in this document.

ARTICLE II

DEFINITIONS

As used herein the following words and phrases shall have the following respective meanings for purposes of the Plan unless the context clearly indicates otherwise.

2.1 Accrued Compensation. “Accrued Compensation” shall mean an amount which shall include all amounts earned or accrued through the “Termination Date” (as hereinafter defined) but not paid as of the Termination Date including (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by the “Participant” (as hereinafter defined) on behalf of the Employer during the period ending on the Termination Date in accordance with the Employer’s business expense reimbursement policies, (iii) vacation pay as required by law, and (iv) bonuses and incentive compensation (other than the “Pro Rata Bonus” (as hereinafter defined)).

2.2 Base Amount. “Base Amount” shall mean the greater of the Participant’s annual base salary (a) at the rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to the Change in Control, and shall include all

amounts of the Participant’s base salary that are deferred under the Employer’s qualified and non-qualified employee benefit plans.

2.3 Benefits Amount. “Benefits Amount” shall mean an amount equal to thirty percent (30%) of the Participant’s Base Amount.

2.4 Board. “Board” shall mean the Board of Directors of the Company.

2.5 Bonus Amount. “Bonus Amount” shall mean the highest annual bonus paid or payable to the Participant for any fiscal year in respect of the three (3) full fiscal years ended prior to the Change in Control.

2.6 Business Day. “Business Day” shall mean a day, other than Saturday, Sunday or other day on which commercial banks in Fort Worth, Texas are authorized or required by applicable law to close.

2.7 Cause. The Participant’s Employer may terminate the Participant’s employment for “Cause” if the Participant (a) has been convicted of a felony, (b) failed substantially to perform his or her reasonably assigned duties with his or her Employer (other than a failure resulting from his or her incapacity due to physical or mental illness), or (c) has intentionally engaged in conduct which is demonstrably and materially injurious to the Company and/or Employer. No act, or failure to act, on the Participant’s part, shall be considered “intentional” unless the Participant has acted, or failed to act, with a lack of good faith and with a lack of reasonable belief that the Participant’s action or failure to act was in the best interest of the Company and/or Employer.

2.8 Change in Control. “Change in Control” shall mean the occurrence during the “Term” (as hereinafter defined) of any of the following events:

(a) An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of fifteen percent (15%) or more of the combined voting power of the Company’s then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a Non-Control Acquisition (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control.

A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Company (for purposes of this definition, a “Subsidiary”), (ii) the Company or its Subsidiaries, or (iii) any Person in connection with a Non-Control Transaction (as hereinafter defined);

(b) The individuals who, as of the Effective Date, are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least two-thirds of the Board;

provided, however, that if the election, or nomination for election by the Company’s stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or

(1) A merger, consolidation, reorganization or other business combination with or into the Company or in which securities of the Company are issued, unless

(i) the stockholders of the Company, immediately before such merger, consolidation, reorganization or other business combination, own directly or indirectly immediately following such merger, consolidation, reorganization or other business combination, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation, reorganization or other business combination (the “Surviving Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation, reorganization or other business combination,

(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation, reorganization or other business combination constitute at least two-thirds of the members of the board of directors of the Surviving Corporation, or a corporation beneficially directly or indirectly owning a majority of the combined voting power of the outstanding voting securities of the Surviving Corporation, or

(iii) no Person other than (i) the Company, (ii) any Subsidiary, (iii) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to such merger, consolidation, reorganization or other business combination was maintained by the Company, the Surviving Corporation, or any Subsidiary, or (iv) any Person who, immediately prior to such merger, consolidation, reorganization or other business combination had Beneficial Ownership of fifteen percent (15%) or more of the then outstanding Voting Securities, has Beneficial Ownership of fifteen percent (15%) or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities, and

(iv) A transaction described in clauses (i) through (iii) shall herein be referred to as a “Non-Control Transaction.”

(2) A complete liquidation or dissolution of the Company; or

(3) The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than (i) any such sale or disposition that results in at least fifty percent (50%) of the Company’s assets being owned by one or more subsidiaries or (ii) a distribution to the Company’s stockholders of the stock of a subsidiary or any other assets).

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding Voting Securities (X) as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this subsection (X)) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur, or (Y) and such Subject Person (1) within fourteen (14) Business Days (or such greater period of time as may be determined by action of the Board) after such Subject Person would otherwise have caused a Change in Control (but for the operation of this clause (Y)), such Subject Person notifies the Board that such Subject Person did so inadvertently, and (2) within seven (7) Business Days after such notification (or such greater period of time as may be determined by action of the Board), such Subject Person divests itself of a sufficient number of Voting Securities so that such Subject Person is no longer the Beneficial Owner of more than the permitted amount of the outstanding Voting Securities.

(d) Notwithstanding anything contained in the Plan to the contrary, if the Participant’s employment is terminated during the Term but within one (1) year prior to a Change in Control and the Participant reasonably demonstrates that such termination (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control (a “Third Party”) or (ii) otherwise occurred in connection with, or in anticipation of, a Change in Control which actually occurs, then for all purposes of the Plan, the date of a Change in Control with respect to the Participant shall mean the date immediately prior to the date of such termination of the Participant’s employment.

2.9 “Code” means the Internal Revenue Code of 1986, as amended.

2.10 Company. “Company” shall mean RadioShack Corporation and shall include its “Successors and Assigns” (as hereinafter defined).

2.11 Disability. “Disability” shall mean a physical or mental infirmity which impairs the Participant’s ability to substantially perform his or her duties with his or her Employer for a period of one hundred eighty (180) consecutive days and the Participant has not returned to his

or her full time employment prior to the Termination Date as stated in the “Notice of Termination” (as hereinafter defined).

2.12 Effective Date. “Effective Date” shall be May 18, 2006.

2.13 Eligible Emp1oyee. “Eligible Employee” shall mean any officer of the Company on the day on which the Change in Control of the Company occurs, other than those officers who are parties to a Termination Protection Agreement with the Company or any Subsidiary.

2.14 Employer. “Employer” shall mean the Company or its divisions or its “Subsidiaries” (as hereinafter defined) with whom the Eligible Employee is employed.

2.15 Good Reason. “Good Reason” shall mean the occurrence after a Change in Control of any of the events or conditions described in Subsections (i) and (ii) hereof:

(i) the failure by the Employer to (A) comply with the provisions of Section 4.2(a) or (B) pay or provide compensation or benefits pursuant to the terms of Section 4.3, in either case, within fifteen (15) days of the date notice of such failure is given to the Employer; and

(ii) the failure of the Company and/or the Employer to obtain an agreement from any Successor or Assign of the Company, to assume and agree to perform the Plan, as contemplated in Section 9.1 hereof, within thirty (30) days after the Change in Control.

Any event or condition described in this Section 2.15(i) and (ii) which occurs during the Term but within one (1) year prior to a Change in Control but which the Participant reasonably demonstrates (A) was at the request of a Third Party or (B) otherwise arose in connection with or in anticipation of a Change in Control which actually occurs, shall constitute Good Reason for purposes of the Plan notwithstanding that it occurred prior to the Change in Control.

2.16 Notice of Termination. Following a Change in Control, “Notice of Termination” shall mean a notice of termination of the Participant’s employment from the Employer which indicates the specific termination provision in the Plan relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant’s employment under the provision so indicated.

2.17 Participant. “Participant” shall mean an Eligible Employee who satisfies the requirements of Section 3.1 and who has not ceased to be a Participant pursuant to Section 3.2.

2.18 Payroll Date. “Payroll Date” shall mean each regularly scheduled date during Participant’s employment on which base salary payments are made and after a Termination Date, each regularly scheduled date on which such payments would be made if employment continued.

2.19 Plan. “Plan” shall mean the RadioShack Corporation Amended and Restated Termination Protection Plan Level I.

2.20 Pro-Rata Bonus. “Pro-Rata Bonus” shall mean the Bonus Amount multiplied by a fraction, the numerator of which is the number of days in the Company’s fiscal year through and including the Participant’s Termination Date and the denominator of which is 365.

2.21 Subsidiary or Subsidiaries. “Subsidiary” or “Subsidiaries” shall mean any corporation in which the Company owns, directly or indirectly, 50% or more of the total voting power of the corporation’s outstanding voting securities and any other corporation designated by the Board as a Subsidiary.

2.22 Successors and Assigns. “Successors and Assigns” as used herein shall mean a corporation or other entity acquiring all or substantially all the assets and business of the Company (including the Plan) whether by operation of law or otherwise.

2.23 Term. “Term” shall mean the period of time the Plan remains effective as provided in Section 10.1.

2.24 Termination Date. “Termination Date” shall mean in the case of the Participant’s death, his or her date of death, in the case of Good Reason, his or her last day of employment and in all other cases, the date specified in the Notice of Termination; provided, however, if the Participant’s employment is terminated by the Employer for Cause or due to Disability, the date specified in the Notice of Termination shall be at least 30 days from the date the Notice of Termination is given to the Participant; provided, further, however, that in the case of Disability the Participant shall not have returned to the full-time performance of his or her duties during such period of at least 30 days.

2.25 Vested Benefits. “Vested Benefits” shall mean any base salary or prior year’s bonus or incentive compensation earned but unpaid prior to the Termination Date (other than as a result of deferral made at the Participant’s election) and any amounts which are or become vested or which the Participant is otherwise entitled to under the terms of any plan, policy, practice or program of, or any contract or agreement with, the Company or any Subsidiary, at or subsequent to the Termination Date without regard to the performance of further services by the Participant or the resolution of a contingency; provided that the Plan shall in no event be deemed to modify, alter or amend the terms of any such plan, policy, practice or program of, or any contract or agreement with, the Company or any Subsidiary.

ARTICLE III

ELIGIBILITY

3.1 Participation. Each employee shall become a Participant in the Plan immediately upon becoming an Eligible Employee.

3.2 Duration of Participation. A Participant shall cease to be a Participant in the Plan if he or she ceases to be an Eligible Employee of the Employer at any time prior to a Change in Control. A Participant entitled to receive any amounts set forth in this Plan shall remain a Participant in the Plan until all amounts he or she is entitled to have been paid to him or her.

ARTICLE IV

TERMS OF EMPLOYMENT

4.1 Employment Period. The Employer agrees to continue the Participant in its employ, subject to the terms and conditions of this Plan, for the period commencing on the first date on which a Change in Control occurs during the Term (the “Change in Control Date”) and ending on the second anniversary of such date (the “Employment Period”).

4.2 Position and Duties.

(a) During the Employment Period, (A) the Participant’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be commensurate in all material respects with those held, exercised and assigned immediately preceding the Change in Control Date (or, if changed at the request of the third party initiating the Change in Control, then the position, authority, duties and responsibilities in effect immediately prior to such change) and (B) the Participant’s services shall be performed at the location where the Participant was employed preceding the Change in Control Date or any office or location within a twenty mile radius of such location, except for reasonably required travel on the Employer’s business which is not materially greater than such travel requirements prior to the Change in Control.

(b) During the Employment Period, and excluding any periods of vacation and sick leave to which the Participant is entitled, the Participant shall devote reasonable attention and time during normal business hours to the business and affairs of the Employer and to discharge the responsibilities assigned to the Participant. During the Employment Period, Participant may (A) serve on civic or charitable boards or committees of not-for-profit or similar organizations, (B) teach, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Participant’s responsibilities as an employee of the Employer. To the extent that any such activities have been conducted by the Participant prior to the Change in Control Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Change in Control Date shall not thereafter be deemed to interfere with the performance of the Participant’s responsibilities to the Employer.

4.3 Compensation.

(a) Base Salary. During the Employment Period, the Participant shall receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Participant by the Employer and its affiliated companies in respect of the ninety (90) day period immediately preceding the Change in Control Date. During the Employment Period, the Annual Base Salary shall be reviewed no more than twelve months after the last salary increase awarded to the Participant prior to the Change in Control Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Participant under the Plan. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in the

Plan shall refer to Annual Base Salary as so increased. As used in this Plan, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Employer.

(b) Annual Bonus. In addition to Annual Base Salary, the Participant shall be entitled to participate, with respect to each fiscal year ending during the Employment Period, in the Employer’s annual bonus plan, under terms (including measures of performance, targets and payout potential) at least as favorable as the terms under such bonus plan as in effect immediately prior to the Change in Control Date (or, if changed at the request of the third party initiating the Change in Control, then the annual bonus plan in effect immediately prior to such change) (the “Annual Bonus”). Each such Annual Bonus shall be paid within forty-five (45) days following the end of the fiscal year for which the Annual Bonus is awarded, unless the Participant shall elect to defer the receipt of such Annual Bonus.

(c) Incentive, Savings and Retirement Plans. During the Employment Period, the Participant shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Employer and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Participant with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities or retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Employer and its affiliated companies for the Participant under such plans, practices, policies and programs as in effect on the Change in Control Date (or, if changed at the request of the third party initiating the Change in Control, then such plans, practices, policies and programs as in effect immediately prior to such change) or if more favorable to the Participant, those provided generally during the two year Employment Period following the Change in Control Date to other peer executives of the Company and its affiliated companies.

(d) Stock Options and Other Equity Grants. During each year of the Employment Period, the Participant shall receive either (A) stock option grants pursuant to the Company’s 1997 Incentive Stock Plan, the 1999 Incentive Stock Plan or the 2001 Incentive Stock Plan (or any successor or new plan) for each fiscal year ending during the Employment Period equal to the highest number and value to those granted to Participant for the year in which the Change in Control occurs (the “Stock Option Valuation”), or (B) if such Plan or Plans do not exist, then an amount in cash equal to the Stock Option Valuation amount, which amount shall be subject to any vesting schedule and other terms and conditions applicable to such grants in the year in which the Change in Control occurred. In addition, during the Employment Period, the Participant shall receive restricted stock grants pursuant to the Company’s 1997 Incentive Stock Plan or any successor or new plan for each fiscal year during the Employment Period equal to the highest number and value to those granted to Participant for the year in which the Change in Control occurs (the “RSO Valuation”), or (B) if such Plan or Plans do not exist, then an amount in cash equal to the RSO Valuation amount, which amount shall be subject to any vesting schedule and other terms and conditions applicable to such grants in the year in which the Change in Control occurred.

(e) Welfare Benefit Plans. During the Employment Period, the Participant and/or the Participant’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Employer and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Employer and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Participant with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Participant on the Change in Control Date (or, if changed at the request of the third party initiating the Change in Control, then such plans, practices, policies and programs as in effect immediately prior to such change) or, if more favorable to the Participant, those provided generally at any time after the Change in Control Date to other peer executives of the Company and its affiliated companies.

(f) Expenses. During the Employment Period, the Participant shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Participant in accordance with the most favorable policies, practices and procedures of the Employer and its affiliated companies in effect for the Participant on the Change in Control Date (or, if changed at the request of the third party initiating the Change in Control, then such policies, practices and procedures as in effect immediately prior to such change) or, if more favorable to the Participant, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

(g) Fringe Benefits. During the Employment Period, the Participant shall be entitled to fringe benefits, or cash payments in lieu of such fringe benefits, in accordance with the most favorable plans, practices, programs and policies of the Employer and its affiliated companies in effect for the Participant on the Change in Control Date (or, if changed at the request of the third party initiating the Change in Control, then such plans, practices, programs and policies as in effect immediately prior to such change) or, if more favorable to the Participant, as in effect generally at any time thereafter with respect to other peer executives of the Employer and its affiliated companies.

(h) Office and Support Staff. During the Employment Period, the Participant shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Participant by the Employer and its affiliated companies on the Change in Control Date (or, if changed at the request of the third party initiating the Change in Control, then such office(s), furnishing, other appointments and assistance as in effect immediately prior to such change) or, if more favorable to the Participant, as provided generally at any time thereafter with respect to other peer executives of the Employer and its affiliated companies.

(i) Vacation. During the Employment Period, the Participant shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Employer and its affiliated companies as in effect for the Participant on the Change in Control Date (or, if changed at the request of the third party initiating the Change in Control, then such plans, practices, programs and policies as in effect immediately prior to such change)

or, if more favorable to the Participant, as in effect generally at any time thereafter with respect to other peer executives of the Employer and its affiliated companies.

(j) Indemnification. The Employer shall indemnify the Participant and hold the Participant harmless to the fullest extent permitted by applicable law and under the by-laws of the Employer against and in respect to any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including reasonable attorneys’ fees), losses, and damages resulting from the Participant’s good faith performance of the Participant’s duties and obligations with the Employer. This provision is in addition to any other rights of indemnification the Participant may have pursuant to any indemnification agreement or other agreement, if any, between the Participant and the Employer.

ARTICLE V

TERMINATION BENEFITS

5.1 Payment of Accrued Compensation. In the event that a Participant’s employment with his or her Employer is terminated following a Change in Control during the Term (a) by reason of the Participant’s death, (b) by his or her Employer for Cause or Disability, or (c) by the Participant without Good Reason, the Participant shall be entitled to receive and the Company shall pay, his or her Accrued Compensation and, if such termination is other than by his or her Employer for Cause, a Pro Rata Bonus.

5.2 Payment in Event of Certain Terminations of Employment. In the event that a Participant’s employment with his or her Employer is terminated following a Change in Control during the Term by the Participant or by his or her Employer for any reason other than as specified in Section 5.1, the Participant shall be entitled to receive under the Plan, a cash payment equal to the sum of:

(a) his or her Accrued Compensation and Pro Rata Bonus,

(b) his or her Base Amount,

(d) his or her Benefits Amount.

The amounts provided for in this Sections 5.2 shall be paid in a single lump sum cash payment within five (5) days after the Participant’s Termination Date (or earlier, if required by applicable law or later if required by Code Section 409A or Section 5.7 hereof).

5.3 Mitigation. The Participant shall not be required to mitigate the amount of any payment provided for in the Plan by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Participant in any subsequent employment.

5.4 Termination Pay. The payments and benefits provided for in Section 5.2(a), (b), (c) and (d) shall reduce the amount of any cash severance or termination pay payable to the Participant under any other Employer severance or termination plan, program, policy or practice.

5.5 Vested Benefits. In the event that a Participant’s employment with his or her Employer is terminated following a Change in Control during the Term by the Participant or by his or her Employer, the Employer shall pay all Vested Benefits to a Participant no later than the second Payroll Date following the Termination Date (or such later date as may be required under Code Section 409A); provided that any Vested Benefits attributable to a plan, policy practice, program, contract or agreement shall be payable in accordance with the terms thereof under which the amounts have accrued.

5.6 Insurance. The Employer shall cover the Participant under directors and officers liability insurance both during and, while potential liability exists, after the Termination Date in the same amount and to the same extent as the Employer covers its other officers or employees.

5.7 Conditions to Payments. Any payments or benefits made or provided pursuant to this Article V (other than Accrued Compensation) are subject to the Participant’s:

(a) compliance with the provisions of Article VIII hereof;

(b) delivery to the Company of an executed Confidentiality, Nonsolicitation and General Release Agreement (the “General Release”), which shall be substantially in the form attached hereto as Exhibit A (with such changes therein or additions thereto as needed under then applicable law to give effect to its intent and purpose) within twenty-one (21) days of presentation thereof by the Company to the Participant; and

(c) delivery to the Company of a resignation from all offices, directorships and fiduciary positions with the Company, its affiliates and employee benefit plans.

Notwithstanding the due date of any post-employment payments, any amounts due following a termination under this Plan (other than Accrued Compensation) shall not be due until after the expiration of any revocation period applicable to the General Release without the Participant having revoked such General Release, and any such amounts shall be paid to the Participant within thirty (30) days of the expiration of such revocation period without the occurrence of a revocation by the Participant (or such later date as may be required under Section 409A of the Code). Nevertheless (and regardless of whether the General Release has been executed by the Participant), upon any termination of Participant’s employment, Participant shall be entitled to receive any Accrued Compensation, payable within thirty (30) days after the date of termination or in accordance with the applicable plan, program or policy. In the event that the Participant dies before all payments pursuant to this Article V have been paid, all remaining payments shall be made to the beneficiary specifically designated by the Participant in writing prior to his death, or, if no such beneficiary was designated (or the Employer is unable in good faith to determine the beneficiary designated), to his or her personal representative or estate.

ARTICLE VI

TERMINATION OF EMPLOYMENT

6.1 Notice of Termination Required. Following a Change in Control, any purported termination of the Participant’s employment by the Employer shall be communicated by Notice of Termination to the Participant. For purposes of the Plan, no such purported termination shall be effective without such Notice of Termination.

ARTICLE VII

LIMITATION ON PAYMENTS BY THE COMPANY

7.1 Excise Tax Limitation.

(a) Notwithstanding anything contained in the Plan to the contrary, to the extent that the payments and benefits provided under the Plan and benefits provided to, or for the benefit of, the Participant under any other Employer plan or agreement (such payments or benefits are collectively referred to as the “Payments”) would be subject to the excise tax (the “Excise Tax”) imposed under Section 4999 of the Code, the Payments shall be reduced (but not below zero) if and to the extent that a reduction in the Payments would result in the Participant retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if the Participant received all of the Payments (such reduced amount is hereinafter referred to as the “Limited Payment Amount”). Unless the Participant shall have given prior written notice specifying a different order to the Company to effectuate the Limited Payment Amount, the Company shall reduce or eliminate the Payments, by first reducing or eliminating those payments or benefits which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the “Determination” (as hereinafter defined). Any notice given by the Participant pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Participant’s rights and entitlements to any benefits or compensation.

(b) An initial determination as to whether the Payments shall be reduced to the Limited Payment Amount pursuant to the Plan and the amount of such Limited Payment Amount shall be made by an accounting firm at the Company’s expense selected by the Company which is designated as one of the five (5) largest accounting firms in the United States (the “Accounting Firm”). The Accounting Firm shall provide its determination (the “Determination”), together with detailed supporting calculations and documentation to the Company and the Participant within five (5) days of the Termination Date if applicable, or such other time as requested by the Company or by the Participant (provided the Participant reasonably believes that any of the Payments may be subject to the Excise Tax) and if the Accounting Firm determines that no Excise Tax is payable by the Participant with respect to a Payment or Payments, it shall furnish the Participant with an opinion reasonably acceptable to the Participant that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the Determination to the Participant, the Participant shall have the right to dispute the Determination (the “Dispute”). If there is no

Dispute, the Determination shall be binding, final and conclusive upon the Company and the Participant subject to the application of Paragraph 7.1(c) below.

(c) As a result of the uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that the Payments to be made to, or provided for the benefit of, the Participant either have been made or will not be made by the Company which, in either case, will be inconsistent with the limitations provided in Section 7.1(a) (hereinafter referred to as an “Excess Payment” or “Underpayment”, respectively). If it is established pursuant to a final determination of a court or an Internal Revenue Service (the “IRS”) proceeding which has been finally and conclusively resolved, that an Excess Payment has been made, such Excess Payment shall be deemed for all purposes to be a loan to the Participant made on the date the Participant received the Excess Payment and the Participant shall repay the Excess Payment to the Company on demand (but not less than ten (10) days after written notice is received by the Participant) together with interest on the Excess Payment at the “Applicable Federal Rate” (as defined in Section 1274(d) of the Code) from the date of the Participant’s receipt of such Excess Payment until the date of such repayment. In the event that it is determined by (i) the Accounting Firm, the Company (which shall include the position taken by the Company, or together with its consolidated group, on its federal income tax return) or the IRS, (ii) pursuant to a determination by a court, or (iii) upon the resolution to the Participant’s satisfaction of the Dispute, that an Underpayment has occurred, the Company shall pay an amount equal to the Underpayment to the Participant within ten (10) days of such determination or resolution together with interest on such amount at the Applicable Federal Rate from the date such amount would have been paid to the Participant until the date of payment.

ARTICLE VIII

PARTICIPANT COVENANTS

8.1 Confidentiality and Nonsolicitation Agreement. As a condition to receiving the right to receive any benefits under the Plan, each Participant shall enter into and comply with a Confidentiality, Nonsolicitation and General Release Agreement with the Company, substantially in the form of Exhibit A hereto.

ARTICLE IX

SUCCESSORS AND ASSIGNS

9.1 Successors and Assigns.

(a) The Plan shall be binding upon and shall inure to the benefit of the Company and the Employer. The Company and the Employer shall require any Successor or Assign to expressly assume and agree to perform the Plan in the same manner and to the same extent that the Company and/or the Employer would be required to perform it if no such succession or assignment had taken place.

(b) Neither the Plan nor any right or interest hereunder shall be assignable or transferable by the Participant, his or her beneficiaries or legal representatives, except by will or by the laws of descent and distribution; provided, however, that the Plan shall inure to the benefit of and be enforceable by the Participant’s legal personal representative.

9.2 Sale of Business or Assets. Notwithstanding anything contained in the Plan to the contrary, if a Participant’s employment with his or her Employer is terminated in connection with the sale, divestiture or other disposition of any Subsidiary or division of the Company (or part thereof) such termination shall not be a termination of employment of the Participant for purposes of the Plan and the Participant shall not be entitled to benefits from the Company under the Plan as a result of such sale, divestiture, or other disposition, or as a result of any subsequent termination of employment, provided that (a) the Participant is offered employment by the purchaser or acquiror of such Subsidiary or division (or part thereof) and (b) the Company obtains an agreement from such purchaser or acquiror to perform the Company’s and/or Employer’s obligations under the Plan, in the same manner, and to the same extent that the Company and/or the Employer would be required to perform if no such purchase or acquisition had taken place. In such circumstances, the purchaser or acquiror shall be solely responsible for providing any benefits payable under the Plan to any such Participant.

ARTICLE X

TERM, AMENDMENT AND PLAN TERMINATION

10.1 Term. The Plan shall continue in effect for a period of two (2) years commencing on the Effective Date and shall be automatically extended for one (1) year on the first anniversary of the Effective Date and on each anniversary of the Effective Date thereafter unless the Company shall have delivered a written notice to each Participant at least ninety (90) days prior to any extension that the Plan shall not be so extended; provided, however, that if a Change in Control occurs while the Plan is in effect, the Plan shall not end prior to the expiration of two (2) years following the Change in Control.

10.2 Amendment and Termination. Subject to Section 10.1, the Plan may be terminated or amended in any respect by resolution adopted by two-thirds (2/3) of the members of the Incumbent Board; provided, however, that no such amendment or termination of the Plan during the Term may be made (a) at the request of a Third Party, or (b) otherwise in connection with, or in anticipation of, a Change in Control; and provided, further, however, that the Plan no longer shall be subject to amendment, change, substitution, deletion, revocation or termination in any respect whatsoever following a Change in Control.

10.3 Form of Amendment. The form of any amendment or termination of the Plan shall be a written instrument signed by a duly authorized officer or officers of the Company, certifying that the amendment or termination has been approved by the Board in accordance with Section 10.2.

ARTICLE XI

MISCELLANEOUS

11.1 Contractual Right. Upon and after a Change in Control, each Participant shall have a fully vested, non-forfeitable contractual right, enforceable against the Company, to the benefits provided for under Sections 5.1, 5.2, 5.6 and 5.7 of the Plan upon satisfaction of the applicable conditions specified in those Sections.

11.2 Employment Status. Prior to a Change in Control, each Eligible Employee shall continue in his or her status as an employee-at-will and the Plan does not constitute a contract of employment or impose on the Employer any obligation to (a) retain the Participant, (b) make any payments upon termination of employment, (c) change the status of the Participant’s employment or (d) change any employment policies of the Employer.

11.3 Notice. For the purposes of the Plan, notices and all other communications provided for in the Plan (including the Notice of Termination) shall be in writing and shall be deemed to have been duly given when personally delivered or sent by a nationally recognized overnight delivery service or by certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by each party to the other, provided that all notices to the Company and/or the Employer shall be directed to the attention of the Board with a copy to the Secretary of the Company. All notices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after the sending thereof, except that notice of change of address shall be effective only upon receipt.

11.4 Non-exclusivity of Rights. Except as provided in Section 5.4, nothing in the Plan shall prevent or limit the Participant’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company and/or the Employer for which the Participant may qualify, nor shall anything herein limit or reduce such rights as the Participant may have under any other agreements with the Company and/or the Employer. Amounts which are Vested Benefits or which the Participant is otherwise entitled to receive under any plan or program of the Company and/or the Employer shall be payable in accordance with such plan or program, except as explicitly modified by the Plan. No additional compensation provided under any benefit or compensation plans to the Participant shall be deemed to modify or otherwise affect the terms of the Plan or any of the Participant’s entitlements hereunder.

11.5 Settlement of Claims. The Company’s obligation to make the payments provided for in the Plan and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company and/or Employer may have against the Participant or others.

11.6 Trust. All benefits under the Plan shall be paid by the Company. The Plan shall be unfunded and the benefits hereunder shall be paid only from the general assets of the Company; provided, however, notwithstanding anything contained in the Plan to the contrary, nothing herein shall prevent or prohibit the Company from establishing a trust or other arrangement for the purpose of providing for the payment of the benefits payable under the Plan.

11.7 Waiver or Discharge. No provision of the Plan may be waived or discharged unless such waiver or discharge is agreed to in writing and signed by the Participant, the Employer and the Company. No waiver by either the Company, the Employer or any Participant at any time of any breach by either the Company, the Employer or any Participant of, or compliance with, any condition or provision of the Plan to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

11.8 Governing Law. THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THE PLAN SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF; PROVIDED, HOWEVER, THAT IN ANY ACTION INVOLVING A PARTICIPANT, THE COMPANY AND/OR THE EMPLOYER WITH RESPECT TO ANY CLAIM OR ASSERTION THAT THE PARTICIPANT’S EMPLOYMENT WAS PROPERLY TERMINATED FOR CAUSE, THE COMPANY AND/OR THE EMPLOYER HAS THE BURDEN OF PROVING THAT THE PARTICIPANT’S EMPLOYMENT WAS PROPERLY TERMINATED FOR CAUSE.

11.9 Validity and Severability. The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision of the Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction, shall not invalidate or render unenforceable such provision in any other jurisdiction.

11.10 Legal Fees. Following a Change in Control, the Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the Participant as they become due as a result of (a) the Participant’s termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), or (b) the Participant’s seeking to obtain or enforce any right or benefit provided by the Plan (including any such fees and expenses incurred in connection with the Dispute) or by any other plan or arrangement maintained by the Company and/or Employer under which the Participant is or may be entitled to receive benefits; provided however, that the circumstances set forth in clauses (a) and (b) (other than as a result of the Participant’s termination of employment under circumstances described in Section 2.8(d)) occurred on or after a Change in Control.

11.11 Forum. Any suit brought under the Plan shall be brought in the appropriate state or federal court for Tarrant County, Texas.

11.12 Withholding. The Company may withhold from any amounts payable under the Plan such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

11.13 Code Section 409A. It is intended that the Plan and the Board’s exercise of authority or discretion hereunder shall comply with the provisions of Code Section 409A and the treasury regulations relating thereto so as not to subject a Participant to the payment of interest and tax penalty which may be imposed under Code Section 409A. In furtherance of this interest,

to the extent that any regulations or other guidance issued under Code Section 409A after the Effective Date would result in a Participant being subject to payment of interest and tax penalty under Code Section 409A, the Board may amend the Plan, including with respect to the timing of payment of benefits, in order to avoid the application of Code Section 409A.

EXHIBIT A

FORM OF CONFIDENTIALITY, NONSOLICITATION AND GENERAL

RELEASE AGREEMENT

This Confidentiality, Nonsolicitation and General Release Agreement (this “Agreement”), dated , 200 is between RadioShack Corporation, a Delaware corporation (the “Company”), and (the “Participant”) (collectively the “Parties”).

NOW THEREFORE, for valuable consideration, the adequacy which is hereby acknowledged, the Parties agree as follows:

1. Separation of Employment with the Company.

a. Effective , 200 (the “Termination Date”), Participant is terminated and separated from his/her position as of the Company, and Participant thereby relinquishes and resigns from all officer and director positions, all other titles, and all authorities with respect to the Company or any affiliated entity of the Company and shall be deemed terminated and separated from employment with the Company for all purposes.

b. As consideration to Participant for this Agreement, the Company agrees to pay Participant his/her Accrued Compensation and Pro Rata Bonus, Base Amount, Bonus Amount and Benefits Amount in accordance with the Company’s Amended and Restated Termination Protection Plan Level 1 (the “Plan”); provided, however, Participant does not exercise his/her right of revocation under Section 6. hereof.

c. This Agreement shall be construed in accordance and consistent with, and subject to, the provisions of the Plan (the provisions of which are incorporated herein by reference) and, except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.

2. Covenants Not to Solicit or Interfere.

a. During the period of time equal to twelve (12) months after the Termination Date, Participant shall not, either directly or indirectly, within the United States of America or any country of the world in which the Company sells, imports, exports, assembles, packages or furnishes its products, articles, parts, supplies, accessories or services or is causing them to be sold, imported, exported, assembled, packaged or furnished through related entities, representatives, agents, or otherwise:

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i. solicit or induce, or attempt to solicit or induce, any employee of the Company, current or future, to leave or cease their relationship with the Company, for any reason whatsoever, or hire any current or future employee of the Company; or

ii. solicit or attempt to solicit the Company’s existing or prospective customers to purchase services or products that are competitive with those manufactured, designed, programmed, serviced, repaired, rented, marketed, offered for sale and/or under any stage of development by the Company as of the date of Participant’s separation from the Company. For purposes of this Agreement, existing customers shall mean those persons or firms that the Company has made a sale to in the twelve (12) months preceding Participant’s separation from employment; and prospective customers shall mean those persons or firms whom the Company has solicited and/or negotiated to sell the Company’s products, articles, parts, supplies, accessories or services to within the twelve (12) months preceding Participant’s separation from the Company.

b. Participant acknowledges that the Company conducts its business on an international level and has customers throughout the United States and many other countries, and that the geographic restriction on solicitation is therefore fair and reasonable.

3. Confidential Information.

a. For purposes of this Agreement, “Confidential Information” includes any and all information and trade secrets, whether written or otherwise, relating to the Company’s business, property, products, services, operations, sales, prospects, research, customers, business relationships, business plans and finances.

b. Participant acknowledges that while employed at the Company, Participant has had access to Confidential Information. Participant further acknowledges that the Confidential Information is of great value to the Company and that its improper disclosure will cause the Company to suffer damages, including loss of profits.

c. Participant shall not at any time or in any manner use, copy, disclose, divulge, transmit, convey, transfer or otherwise communicate any Confidential Information to any person or entity, either directly or indirectly, without the Company’s prior written consent.

d. Participant acknowledges that all of the information described in subsection (a) above is “Confidential Information,” which is the sole and exclusive property of the Company. Participant acknowledges that all Confidential Information was revealed to Participant in trust, based solely upon the confidential employment relationship then existing between the Company and Participant. Participant agrees: (1) that all writings or other records concerning Confidential Information are the sole and exclusive property of the Company; (2) that all manuals, forms, and supplies furnished to or used by Participant and all data or information placed thereon by Participant or any other person are the Company’s sole and exclusive property; (3) that, upon execution of this Agreement, or upon request of the Company at any time, Participant shall deliver to the Company all such writings, records, forms, manuals, and supplies and all copies of such; (4) that Participant will not make or retain any copies of such for his/her own or personal use, or take the originals or copies of such from the offices of the Company; and (5) that

A-2

Participant will not, at any time, publish, distribute, or deliver any such writing or records to any other person or entity, or disclose to any person or entity the contents of such records or writings or any of the Confidential Information.

e. Participant acknowledges that he/she has not disclosed in the past, and agrees not to disclose in the future, to the Company any confidential information or trade secrets of former employers or other entities Participant has been associated with.

4. Non-Disparagement. Each of Participant and the Company (for purposes hereof, “the Company” shall mean only (i) the Company by press release or other formally released announcement and (ii) the executive officers and directors thereof and not any other employees) agrees not to make any public statements that disparage the other party, or in the case of the Company, its respective affiliates, employees, officers, directors, products, articles, parts, supplies, accessories or services. Notwithstanding the foregoing, statements made in the course of sworn testimony in administrative, judicial or arbitral proceedings (including, without limitation, depositions in connection with such proceedings) shall not be subject to this Section 3.

5. Injunctive Relief; Damages. Participant acknowledges that any breach of this Agreement will cause irreparable injury to the Company and that money damages alone would be inadequate to compensate it. Upon a breach or threatened breach by Participant of any of this Agreement, the Company shall be entitled to a temporary restraining order, preliminary injunction, permanent injunction or other relief restraining Participant from such breach without posting a bond. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Participant.

6. General Release

a. The Participant, for himself/herself, his/her spouse, heirs, administrators, children, representatives, executors, successors, assigns, and all other persons claiming through Participant, if any (collectively, “Releasers”), knowingly and voluntarily releases and forever discharges the Company, its affiliates, subsidiaries, divisions, successors and assigns and the current, future and former employees, officers, directors, trustees and agents thereof, from any and all claims, causes of action, demands, fees and liabilities of any kind whatsoever, whether known and unknown, against the Company, that Participant has, has ever had or may have as of the date of execution of this Agreement, including, but not limited to, any alleged violation of:

•

The National Labor Relations Act, as amended;

•

Title VII of the Civil Rights Act of 1964, as amended;

•

The Civil Rights Act of 1991;

•

Sections 1981 through 1988 of Title 42 of the United States Code, as amended;

•

The Employee Retirement Income Security Act of 1974, as amended;

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•

The Immigration Reform and Control Act, as amended;

•

The Americans with Disabilities Act of 1990, as amended;

•

The Age Discrimination in Employment Act of 1967, as amended;

•

The Older Workers Benefit Protection Act of 1990;

•

The Worker Adjustment and Retraining Notification Act, as amended;

•

The Occupational Safety and Health Act, as amended;

•

The Family and Medical Leave Act of 1993;

•

The Equal Pay Act;

•

The Texas Labor Code;

•

The Texas Commission on Human Rights Act;

•

The Texas Pay Day Act;

•

Chapter 38 of the Texas Civil Practices and Remedies Code;

•

Any other federal, state or local civil or human rights law or any other local, state or federal law, regulation or ordinance;

•

Any provisions of the State of Texas or Federal Constitutions; or

•

Any public policy, contract, tort, or common law.

Notwithstanding anything herein to the contrary, this Agreement shall not apply to: (i) Participant’s rights of indemnification and directors’ and officers’ liability insurance coverage to which he/she was entitled immediately prior to the Termination Date hereof with regard to his/her service as an officer of the Company; (ii) Participant’s rights under any tax-qualified pension, claims for accrued vested benefits under any other employee benefit plan, policy or arrangement maintained by the Company or under COBRA, and benefits which must be provided to Participant pursuant to the terms of any employee benefit plan of the Company; (iii) Participant’s rights under the provisions of the Plan which are intended to survive termination of employment; or (iv) Participant’s rights as a stockholder. Excluded from this Agreement are any claims which cannot be waived by law.

b. Participant acknowledges and recites that:

(i) Participant has executed this Agreement knowingly and voluntarily;

(ii) Participant has read and understands this Agreement in its entirety, including the waiver of rights under the Age Discrimination in Employment Act;

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(iii) Participant has been advised and directed orally and in writing (and this subparagraph (b) constitutes such written direction) to seek legal counsel and any other advice he/she wishes with respect to the terms of this Agreement before executing it;

(iv) Participant has sought such counsel, or freely and voluntarily waives the right to consult with counsel, and Participant has had an opportunity, if he/she so desires, to discuss with counsel the terms of this Agreement and their meaning;

(v) Participant enters into this Agreement knowingly and voluntarily, without duress or reservation of any kind, and after having given the matter full and careful consideration; and

(vi) Participant has been offered 21 calendar days after receipt of this Agreement to consider its terms before executing it. If Participant has not executed this Agreement within 21 days after receipt, this Agreement shall be unenforceable and null and void.

c. Participant shall have 7 days from the date hereof to revoke this Agreement by providing written notice of the revocation as set forth in Section 5, below, in which event this Agreement shall be unenforceable and null and void.

d. 21 DAYS TO SIGN; 7-DAY REVOCATION PERIOD. PARTICIPANT UNDERSTANDS THAT HE/SHE MAY TAKE UP TO 21 CALENDAR DAYS FROM THE DATE OF RECEIPT OF THIS AGREEMENT TO CONSIDER THIS AGREEMENT BEFORE SIGNING IT. FULLY UNDERSTANDING PARTICIPANT’S RIGHT TO TAKE 21 DAYS TO CONSIDER SIGNING THIS AGREEMENT, AND AFTER HAVING SUFFICIENT TIME TO CONSIDER PARTICIPANT’S OPTIONS, PARTICIPANT HEREBY WAIVES HIS/HER RIGHT TO TAKE THE FULL 21 DAY PERIOD. PARTICIPANT FURTHER UNDERSTANDS THAT HE/SHE MAY REVOKE THIS AGREEMENT AT ANY TIME DURING THE SEVEN (7) CALENDAR DAYS AFTER SIGNING IT, AND THAT THIS AGREEMENT SHALL NOT BECOME BINDING UNTIL THE SEVEN (7) DAY REVOCATION PERIOD HAS PASSED.

e. To revoke this Agreement, Participant must send a written statement of revocation to:

the Company Corporation

MS CF5-121

300 RadioShack Circle

Fort Worth, TX 76102

Attn: Vice President-Compensation and Benefits

The revocation must be received no later than 5:00 p.m. on the seventh day following Participant’s execution of this Agreement.

7. Cooperation. Participant agrees to cooperate with the Company, and its financial and legal advisors, and/or government officials, in any claims, investigations, administrative proceedings, lawsuits, and other legal, internal or business matters, as reasonably requested by the Company. Also, to the extent Participant incurs travel or other expenses with respect to such

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activities, the Company will reimburse his/her for such reasonable expenses documented and approved in accordance with the Company’s then current travel policy.

8. No Admission. This Agreement shall not in any way be construed as an admission by the Company of any act of discrimination or other unlawful act whatsoever against Participant or any other person, and the Company specifically disclaims any liability to or discrimination against Participant or any other person on the part of itself, its employees, or its agents.

9. Severability. It is the desire and intent of the Parties that the provisions of this Agreement shall be enforced to the fullest extent permissible. Accordingly, if any provision of this Agreement shall prove to be invalid or unenforceable, the remainder of this Agreement shall not be affected, and in lieu, a provision as similar in terms as possible shall be added.

10. Entire Agreement. This Agreement, together with the documents incorporated herein by reference, represents the entire agreement between the parties with respect to the subject matter hereof and this Agreement may not be modified by any oral or written agreement unless same is in writing and signed by both parties.

11. Governing Law. This Agreement shall be governed by the internal laws (and not the choice of law principles) of the State of Texas, except for the application of pre-emptive federal law.

12. Survival. Participant’s obligations under this Agreement shall survive the termination of Participant’s employment and shall thereafter be enforceable whether or not such termination is later claimed or found to be wrongful or to constitute or result in a breach of any contract or of any other duty owed to Participant.

13. Amendments; Waiver. This Agreement may not be altered or amended, and no right hereunder may be waived, except by an instrument executed by each of the Parties.

IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first above written.


THE COMPANY:

RadioShack Corporation, for itself and its subsidiaries

By:
Its:

PARTICIPANT:

Name:

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EX-31.(A) 5 dex31a.htm SECTION 302 CEO CERTIFICATION Section 302 CEO Certification

Exhibit 31(a)

CERTIFICATIONS

I, Julian C. Day, certify that:

I have reviewed this quarterly report on Form 10-Q of RadioShack Corporation;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: October 25, 2006	By	/s/ Julian C. Day
		Julian C. Day
		Chairman of the Board and
		Chief Executive Officer

EX-31.(B) 6 dex31b.htm SECTION 302 CFO CERTIFICATION Section 302 CFO Certification

Exhibit 31(b)

CERTIFICATIONS

I, James F. Gooch, certify that:

I have reviewed this quarterly report on Form 10-Q of RadioShack Corporation;

(a)

(b)

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: October 25, 2006	By	/s/ James F. Gooch
		James F. Gooch
		Executive Vice President and
		Chief Financial Officer

EX-32 7 dex32.htm SECTION 906 CEO AND CFO CERTIFICATION Section 906 CEO and CFO Certification

Exhibit 32

SECTION 1350 CERTIFICATIONS

In connection with the Quarterly Report of RadioShack Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Julian C. Day, Chief Executive Officer of the Company, and James F. Gooch, Chief Financial Officer of the Company, certify to our knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

/s/ Julian C. Day

Julian C. Day

Chief Executive Officer

October 25, 2006

/s/ James F. Gooch

James F. Gooch

Chief Financial Officer

October 25, 2006

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

-----END PRIVACY-ENHANCED MESSAGE-----

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