10-K 1 form10k123106.htm RADIOSHACK CORPORATION FORM 10-K DECEMBER 31, 2006

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-K

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

For the fiscal year ended December 31, 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 CF3-201, 300 RadioShack Circle, Fort Worth, Texas	76102
(Address of principal executive offices)	(Zip Code)

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

________________________

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

	Name of each exchange
Title of each class	on which registered

Common Stock, par value $1 per share	New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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 o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

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 o

Non-accelerated filer o

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

As of June 30, 2006, the aggregate market value of the voting stock held by non-affiliates of the registrant was $1,894,525,234 based on the closing sale price as reported on the New York Stock Exchange.

As of February 16, 2007, there were 136,199,708 shares of the registrant's Common Stock outstanding.

Documents Incorporated by Reference

Portions of the Proxy Statement for the 2007 Annual Meeting of Stockholders are incorporated by reference into Part III.

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Business	4
	Item 1A.	Risk Factors	8
	Item 1B.	Unresolved Staff Comments	11
	Item 2.	Properties	12
	Item 3.	Legal Proceedings	14
	Item 4.	Submission of Matters to a Vote of Security Holders	14
		Executive Officers of the Registrant	14
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Secuirities	16
	Item 6.	Selected Financial Data	17
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	41
	Item 8.	Financial Statements and Supplementary Data	41
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	41
	Item 9A.	Controls and Procedures	42
	Item 9B.	Other Information	42
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	42
	Item 11.	Executive Compensation	43
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	43
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	43
	Item 14.	Principal Accounting Fees and Services	44
PART IV
	Item 15.	Exhibits, Financial Statement Schedules	44
		Signatures	45
		Index to Consolidated Financial Statements	46
		Report of Independent Registered Public Accounting Firm	47
		Index to Exhibits	84

PART I

ITEM 1. BUSINESS.

GENERAL

RadioShack Corporation was incorporated in Delaware in 1967. We primarily engage in the retail sale of consumer electronics goods and services through our RadioShack store chain and non-RadioShack branded kiosk operations. Our strategy is to provide cost-effective solutions to meet the routine electronics needs and distinct electronics wants of our customers. Throughout this report, the terms “our,” “we,” “us” and “RadioShack” refer to RadioShack Corporation, including its subsidiaries.

Our day-to-day 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 that have an adequate return or are operationally necessary

Additional information regarding our business segments is presented below and in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) elsewhere in this Annual Report on Form 10-K. For information regarding the net sales and operating revenues and operating income for each of our business segments for fiscal years ended December 31, 2006, 2005 and 2004, please see Note 27 - “Segment Reporting” in the Notes to Consolidated Financial Statements.

RADIOSHACK COMPANY-OPERATED STORES

At December 31, 2006, we operated 4,467 company-operated stores under the RadioShack brand, located throughout the United States, as well as in Puerto Rico, and the U.S. Virgin Islands. These stores are located in major shopping malls and strip centers, as well as individual storefronts. Each location carries a broad assortment of both private label and third-party branded consumer electronics products. Our product lines include wireless telephones and communication devices such as scanners and two-way radios; flat panel televisions, residential telephones, DVD players, computers and direct-to-home (“DTH”) satellite systems; home entertainment, wireless, imaging and computer accessories; general and special purpose batteries; wire, cable and connectivity products; and digital cameras, radio-controlled cars and other toys, satellite radios and memory players. We also provide consumers access to third-party services such as wireless telephone and DTH satellite activation, satellite radio service, prepaid wireless airtime and extended service plans.

KIOSKS

At December 31, 2006, we operated 772 kiosks located throughout the United States. These kiosks are primarily inside SAM’S CLUB locations, as well as stand-alone Sprint Nextel kiosks in major shopping malls. These locations, which are not RadioShack-branded, offer primarily wireless handsets, their associated accessories, and DTH satellite systems. We also provide consumers access to third-party wireless telephone services.

OTHER

In addition to the reportable segments discussed above, we have other sales channels and support operations, described in more detail below.

Dealer Outlets: At December 31, 2006, we had a network of 1,587 RadioShack dealer outlets, including 36 located outside of North America and 14 in Canada. These outlets provide private label and third-party branded products and services to smaller communities. These independent dealers are often engaged in other retail operations and augment their businesses with our products and service offerings. Our dealer sales derived outside of the United States are not material.

RadioShack.com: Products and information are available through our commercial Web site www.radioshack.com. Online customers can purchase, return or exchange various products available through this Web site. Additionally, certain products ordered online may be picked up, exchanged or returned at neighborhood RadioShack locations.

RadioShack Service Centers: We maintain a service and support network to service the consumer electronics and personal computer retail industry in the U.S. We are a vendor-authorized service provider for many top tier manufacturers, such as Hewlett-Packard, LG Electronics, Motorola, Nokia, RCA/Thomson, and Sony, among others. In addition, we perform repairs for third-party extended service plan providers. At December 31, 2006, we had seven RadioShack service centers in the U.S. and one in Puerto Rico that repair certain name-brand and private label products sold through our various sales channels.

International Operations: At December 31, 2006, we had 9 company-operated stores located in major shopping malls and strip centers and 14 dealer outlets in Canada. As of January 31, 2007, we had closed all of our locations in Canada. Additionally, as of December 31, 2006, there were 146 RadioShack-branded stores and 25 dealers in Mexico. These RadioShack-branded stores and dealer outlets are overseen by a joint venture in which we are a minority owner with Grupo Gigante, S.A. de C.V. Our revenues from foreign customers are not material, and we do not have a material amount of long-lived assets located outside of the United States. We do not consolidate the operations of the Mexican joint venture in our consolidated financial statements.

Support Operations:

Our retail stores, along with our kiosks and dealer outlets, are supported by an established infrastructure. Below are the major components of this support structure.

Distribution Centers - At December 31, 2006, we had six distribution centers shipping over one million cartons each month, on average, to our retail stores and dealer outlets. One of these distribution centers also serves as a fulfillment center for our online customers.

RadioShack Technology Services (“RSTS”) - Our management information system architecture is composed of a distributed, online network of computers that links all stores, customer channels, delivery locations, service centers, credit providers, distribution facilities and our home office into a fully integrated system. Each store has its own server to support the point-of-sale (“POS”) system. The majority of our company-operated stores communicate through a broadband network, which provides efficient access to customer support data. This design also allows store management to track sales and inventory at the product or sales associate level. RSTS provides the majority of our programming and systems analysis needs.

RadioShack Global Sourcing (“RSGS”) - RSGS serves our wide-ranging international import/export, sourcing, evaluation, logistics and quality control needs. RSGS’s activities support our branded and private label business.

RadioShack Customer Support - Using state-of-the-art telephone systems, Web self-help guides and data networks, RadioShack Customer Support responds to more than 1.3 million phone calls and e-mails annually. The responses include answers to customers’ unique requests for hard-to-find parts, batteries and accessories; customer service inquiries; and direct sales requests related to our retail stores. Additionally, in 2006, we outsourced calls regarding our service plans and direct sales requests related to our Web site.

Consumer Electronics Manufacturing - We operate two manufacturing facilities in the United States and one overseas manufacturing operation in China. These three manufacturing facilities employed approximately 1,600 employees as of December 31, 2006. We manufacture a variety of products, primarily sold through our retail outlets, including telephony, antennas, wire and cable products, and a variety of “hard-to-find” parts and accessories for consumer electronics products.

SEASONALITY

As with most other specialty retailers, our net sales and operating revenues, operating income and cash flows are greater during the winter holiday season than during other periods of the year. There is a corresponding pre-seasonal inventory build-up, which requires working capital related to the anticipated increased sales volume. This is described in “Cash Flow and Liquidity” under MD&A. Also, refer to Note 26 - “Quarterly Data (Unaudited)” in the Notes to Consolidated Financial Statements for our quarterly data, which shows seasonality trends. We expect this seasonality to continue.

PATENTS AND TRADEMARKS

We own or are licensed to use many trademarks and service marks related to our RadioShack stores in the United States and in foreign countries. We believe the RadioShack name and marks are well recognized by consumers and that the name and marks are associated with high-quality products and services. We also believe the loss of the RadioShack name and RadioShack marks would have a material adverse impact on our business. Our private label manufactured products are sold primarily under the RadioShack trademark and under the Accurian or Gigaware trademark. We also own various patents and patent applications relating to consumer electronic products.

We do not own any material patents or trademarks associated with our kiosk operations.

SUPPLIERS AND BRANDED RELATIONSHIPS

Our business strategy depends, in part, upon our ability to offer private label and third-party branded products, as well as to provide our customers access to third-party services. We utilize a large number of suppliers located in various parts of the world to obtain raw materials and private label merchandise. We do not expect a lack of availability of raw materials or any single private label product to have a material impact on our operations overall or on any of our operating segments. We have formed vendor and third-party service provider relationships with well-recognized companies such as Sprint Nextel, AT&T, Apple Computer, EchoStar Satellite Corporation (DISH Network), Hewlett-Packard Company and Sirius Satellite Radio. In the aggregate, these relationships have or are expected to have a significant impact on both our operations and financial strategy. Certain of these relationships are important to our business; the loss of or disruption in supply from these relationships could have a material adverse effect on our net sales and operating revenues until new relationships are formed. Additionally, we have been limited from time to time by various vendors and suppliers strictly on an economic basis where demand has exceeded supply.

ORDER BACKLOG

We have no material backlog of orders in any of our operating segments for the products or services that we sell.

COMPETITION

Due to consumer demand for wireless products and services, as well as rapid consumer acceptance of new digital technology products, the consumer electronics retail business continues to be highly competitive, primarily driven by technology and product cycles.

In the consumer electronics retailing business, competitive factors include price, product availability, quality and features, consumer services, manufacturing and distribution capability, brand reputation and the number of competitors. We compete in the sale of our products and services with several retail formats, including consumer electronics retailers such as Circuit City and Best Buy. Department and specialty retail stores, such as Sears and The Home Depot, compete on a more select product category scale. AT&T, Sprint Nextel, and other wireless providers compete directly with us in the wireless telephone category through their own retail and online presence. Mass merchandisers such as Wal-Mart and Target, and other alternative channels of distribution such as mail order and e-commerce retailers, compete with us on a more widespread basis. Numerous domestic and foreign companies also manufacture products similar to ours for other retailers, which are sold under nationally-recognized brand names or private labels.

Management believes we have two primary factors differentiating us from our competition. First, we have an extensive physical retail presence with convenient locations throughout the United States. Second, our specially trained sales staff is capable of providing cost-effective solutions for our customers’ routine electronics needs and distinct electronics wants, assisting with the selection of appropriate products and accessories and, when applicable, assisting customers with service activation.

While we believe we have an effective business strategy, we cannot give assurance that we will continue to compete successfully in the future, given the highly competitive nature of the consumer electronics retail business. Also, in light of the ever-changing nature of the consumer electronics retail industry, we would be adversely affected if our competitors were able to offer their products at significantly lower prices. Additionally, we would be adversely affected if our competitors were able to introduce innovative or technologically superior products not yet available to us, or if we were unable to obtain certain products in a timely manner or for an extended period of time. Furthermore, our business would be adversely affected if we failed to offer value-added solutions or if our competitors were to enhance their ability to provide these value-added solutions.

EMPLOYEES

As of December 31, 2006, we had approximately 40,000 employees, including temporary seasonal employees. Approximately 3,000 temporary employees, hired for the holiday selling season, remained at year end. Our employees are not covered by collective bargaining agreements, nor are they members of labor unions. We consider our relationship with our employees to be good.

AVAILABLE INFORMATION

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and its rules and regulations. The Exchange Act requires us to file reports, proxy statements and other information with the SEC. Copies of these reports, proxy statements and other information can be inspected and copied at:

SEC Public Reference Room

100 F Street, N.E.

Room 1580

Washington, D.C. 20549-0213

You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain copies of any material we have filed with the SEC by mail at prescribed rates from:

Public Reference Section

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549-0213

You may obtain these materials electronically by accessing the SEC’s home page on the Internet at:

http://www.sec.gov

In addition, we make available, free of charge on our Internet Web site, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as our proxy statements, as soon as reasonably practicable after we electronically file this material with, or furnish it to, the SEC. You may review these documents, under the heading “Investor Relations,” by accessing our corporate Web site:

http://www.radioshackcorporation.com

ITEM 1A. RISK FACTORS.

One should carefully consider the following risks and uncertainties described below, as well as other information set forth in this Annual Report on Form 10-K. There may be additional risks that are not presently material or known, and the following list should not be construed as an exhaustive list of all factors that could cause actual results to differ materially from those expressed in forward-looking statements made by us.

We may be unable to successfully execute our strategy to provide cost-effective solutions to meet the routine electronics needs and distinct electronics wants of our customers.

To achieve our strategy, we have undertaken a variety of strategic initiatives. Our failure to successfully execute our strategy or the occurrence of any of the following events could have a material adverse effect on our business:

·	Our inability to keep our extensive store distribution system updated and conveniently located near our target customers

·	Our employees’ inability to provide solutions, answers, and information related to increasingly complex consumer electronics products

·	Our inability to recognize evolving consumer electronics trends and offer products that customers need and want

Our inability to increase or maintain profitability in both our wireless and non-wireless platforms could adversely affect our results.

A critical component of our business strategy is to improve our overall profitability. Our ability to increase profitable sales in existing stores may also be affected by:

·	Our success in attracting customers into our stores

·	Our ability to choose the correct mix of products to sell

·	Our ability to keep stores stocked with merchandise customers will purchase

·	Our ability to maintain fully-staffed stores and trained employees

Any reductions or changes in the growth rate of the wireless industry or changes in the dynamics of the wireless communications industry could cause a material adverse effect on our gross profits and financial results.

Sales of wireless handsets and the related commissions and residual income constitute approximately one-third of our total revenue. Consequently, changes in the wireless industry, such as the ones discussed below, could have a material adverse effect on our results of operations and financial condition.

Lack of growth in the overall wireless industry tends to have a corresponding effect on our wireless sales. Because growth in the wireless industry is often driven by the adoption rate of new wireless handset technologies, the absence of these new technologies, or the lack of consumer interest in adopting these new technologies, could lead to slower growth or a decline in wireless industry profitability, as well as in our overall profitability.

Another change in the wireless industry that could materially and adversely affect our profitability is wireless industry consolidation. Consolidation in the wireless industry could lead to a concentration of competitive strength, particularly competition from wireless carriers’ retail stores, and could, therefore, adversely affect our business as competitive levels increase.

We may not be able to maintain our historical gross margin levels.

Historically, we have maintained gross margin levels ranging from 47% to 50%. We may not be able to maintain these margin levels in the future due to various factors, including increased higher sales of lower margin products such as personal electronics products and third-party branded products. If sales of these lower margin items continue to increase and replace sales of higher margin items, our gross margin and overall gross profit levels will be adversely affected.

Our competition is both intense and varied, and our failure to effectively compete could adversely affect our financial results.

In the retail consumer electronics marketplace, the level of competition is intense. We compete primarily with traditional consumer electronics retail stores and, to a lesser extent, with alternative channels of distribution such as e-commerce, telephone shopping services and mail order. We also compete with wireless carriers’ retail presence, as discussed above. Changes in the amount and degree of promotional intensity or merchandising strategy exerted by our current competitors and potential new competition could present us with difficulties in retaining existing customers, attracting new customers and maintaining our profit margins.

In addition, some of our competitors may use strategies such as lower pricing, wider selection of products, larger store size, higher advertising intensity, improved store design, and more efficient sales methods. While we attempt to differentiate ourselves from our competitors by focusing on the electronics specialty retail market, our business model may not enable us to compete successfully against existing and future competitors.

Adverse changes in national or regional U.S. economic conditions could negatively affect our financial results.

Adverse economic changes could have a significant negative impact on U.S. consumer spending, particularly discretionary spending for consumer electronics products, which, in turn, could directly affect our overall sales. Consumer confidence, recessionary and inflationary trends, equity market levels, consumer credit availability, interest rates, consumers’ disposable income and spending levels, energy prices, job growth and unemployment rates may impact the volume of customer traffic and level of sales in our locations. Negative trends of any of these economic conditions, whether national or regional in nature, could adversely affect our financial results, including our net sales and profitability.

Our inability to effectively manage our inventory levels, particularly excess or inadequate amounts of inventory, could adversely affect our financial results.

We source inventory both domestically and internationally, and our inventory levels are subject to a number of factors beyond our control. These factors, including technology advancements, reduced consumer spending and consumer disinterest in our product offerings, could lead to excess inventory levels. Additionally, we may not accurately assess appropriate product life cycles or end-of-life products, leaving us with excess inventory. To reduce these inventory levels, we may be required to lower our prices, adversely impacting our margin levels and our financial results.

Alternatively, we may have inadequate inventory levels for particular items, including popular selling merchandise, due to factors such as unavailability of products from our vendors, import delays, labor unrest, untimely deliveries or the disruption of international, national or regional transportation systems. The occurrence of any of these factors on our inventory supply could adversely impact our financial results.

Our inability to attract, retain and grow an effective management team or changes in the cost or availability of a suitable workforce to manage and support our operating strategies could cause our operating results to suffer.

Our success depends in large part upon our ability to attract, motivate and retain a qualified management team and employees. Qualified individuals needed to fill necessary positions could be in short supply. The inability to recruit and retain such individuals could continue to result in high employee turnover at our stores and in our company overall, which could have a material adverse effect on our business and financial results. Additionally, competition for qualified employees requires us to continually assess our compensation structure. Competition for qualified employees has required, and in the future could require, us to pay higher wages to attract a sufficient number of qualified employees, resulting in higher labor compensation expense. In addition, proposed changes in the federal minimum wage may adversely affect our compensation expense.

Our inability to successfully identify and enter into relationships with developers of new technologies or the failure of these new technologies to be adopted by the market could impact our ability to increase or maintain our sales and profitability. Additionally, the absence of new services or products and product features in the merchandise categories we sell could adversely affect our sales and profitability.

Our ability to maintain and increase revenues depends, to a large extent, on the periodic introduction and availability of new products and technologies. If we fail to identify these new products and technologies, or if we fail to enter into relationships with their developers prior to widespread distribution within the market, our sales and gross margins could be adversely affected. Furthermore, it is possible that these new products or technologies will never achieve widespread consumer acceptance, also adversely affecting our sales and profitability. Finally, the lack of innovative consumer electronics products, features or services that can be effectively featured in our store model could also impact our ability to increase or maintain our sales and profitability.

Failure to enter into, maintain and renew profitable relationships with providers of third-party branded products could adversely affect our sales and gross margins.

Our large selection of third-party branded products makes up a significant portion of our overall sales. If we are unable to create, maintain or renew our relationships with the suppliers of these products, our sales and our gross margins could be adversely impacted.

The occurrence of severe weather events or natural disasters could significantly damage or destroy outlets or prohibit consumers from traveling to our retail locations, especially during the peak winter holiday shopping season.

If severe weather or a catastrophic natural event, such as a hurricane or earthquake, occurs in a particular region and damages or destroys a significant number of our stores in that area, our overall sales would be reduced accordingly. In addition, if severe weather, such as heavy snowfall or extreme temperatures, discourages or restricts customers in a particular region from traveling to our stores, our sales would also be adversely affected. If severe weather occurs during the fourth quarter holiday season, the adverse impact to our sales and gross profit could be even greater than at other times during the year because we generate a significant portion of our sales and gross profit during this period.

We have contingent lease obligations related to our discontinued retail operations that, if realized, could materially and adversely affect our financial results.

We have contingent liabilities related to retail leases of locations which were assigned to other businesses. The majority of these contingent liabilities relate to various lease obligations arising from leases assigned to CompUSA, Inc. 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 these obligations, we would be responsible for rent due under the leases, which could have a material adverse affect on our financial results.

Failure to comply with, or the additional implementation of, restrictions or regulations regarding the products and/or services we sell or changes in tax rules and regulations applicable to us, could adversely affect our business and our results of operations.

We are subject to various federal, state, and local laws and regulations including, but not limited to, the Fair Labor Standards Act and ERISA, each as amended, and regulations promulgated by the Internal Revenue Service, the United States Department of Labor, the Occupational Safety and Health Administration, and the Environmental Protection Agency. Failure to properly adhere to these and other applicable laws and regulations could result in the imposition of penalties or adverse legal judgments and could adversely affect our business and our results of operations. Similarly, the cost of complying with newly-implemented laws and regulations could adversely affect our business and our results of operations.

Any potential tariffs imposed on products that we import from China, as well as any significant strengthening of China’s currency against the U.S. dollar, could reduce our gross margins and our overall profitability.

We purchase a significant portion of our inventory from manufacturers located in China. Changes in trade regulations (including tariffs on imports) or the continued strengthening of the Chinese currency against the U.S. dollar could increase the cost of items we purchase, which in turn could have a material adverse effect on our gross margins.

Failure to protect the integrity and security of our customers’ information could expose us to litigation, as well as materially damage our standing with our customers.

Increasing costs associated with information security, including increased investments in technology, the costs of compliance with consumer protection laws, and costs resulting from consumer fraud could cause our business and results of operations to suffer materially. Additionally, if a significant compromise in the security of our customer information, including personal identification data, were to occur, it could have a material adverse effect on our reputation, business, operating results and financial condition, and could increase the costs we incur to protect against such security breaches.

Any terrorist activities in the U.S., as well as the international war on terror, could adversely affect our results of operations.

A terrorist attack or series of attacks on the United States could have a significant adverse impact on the United States’ economy. This downturn in the economy could, in turn, have a material adverse effect on our results of operations. The potential for future terrorist attacks, the national and international responses to terrorist attacks, and other acts of war or hostility could cause greater uncertainty and cause the economy to suffer in ways that we currently cannot predict.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

Information on our properties is located in MD&A and the financial statements included in this Annual Report on Form 10-K and is incorporated into this Item 2 by reference. The following items are discussed further on the referenced pages:

Page

Property, Plant and Equipment....................... 62

Commitments and Contingent Liabilities.......... 70

We lease, rather than own, virtually all of our retail facilities. Our stores are located in major shopping malls, stand-alone buildings and shopping centers owned by other entities. We lease one distribution center in the United States and five administrative offices and one manufacturing plant in China. We own the property on which the other five distribution centers and two manufacturing facilities are located within the United States. We sold and leased back the buildings and certain of the property at our corporate headquarters located in downtown Fort Worth, Texas. In connection with this transaction, we entered into a 20-year lease agreement, with four five-year options to renew.

RETAIL OUTLETS

The table below shows our retail locations at December 31, 2006, allocated among domestic RadioShack company-operated stores, kiosks and dealer and other outlets.

	Average Store Size (Sq. Ft.)			At December 31,
	Average Store Size (Sq. Ft.)		2006			2005		2004
RadioShack company-operated stores ⁽¹⁾		2,496			4,467		4,972		5,046
Kiosks ⁽²⁾		101			772		777		599
Dealer and other outlets ⁽³⁾		N/A			1,596		1,711		1,788
Total number of retail locations					6,835		7,460		7,433

⁽¹⁾ In 2006 we closed 505 RadioShack company-operated stores, net of new store openings and relocations. This decline resulted primarily from the implementation of our turnaround program, which included the closure of 481 company-operated stores, 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 below. In 2005, we closed a total of 74 RadioShack company-operated stores, net of new store openings and relocations, due to our decision not to renew leases on locations that failed to meet our financial return goals.

⁽²⁾ As of December 31, 2006, SAM’S CLUB had the unconditional right to assume the operation of up to 66 additional kiosk locations. They assumed 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⁾ Dealer and other outlets included 9 company-operated stores and 14 dealer outlets in Canada at December 31, 2006. In 2005 and 2006, we closed 192 dealer outlets, net of new outlet openings or conversions to RadioShack company-operated stores. This decline was primarily due to the closure of smaller outlets that did not meet our financial return goals.

Real Estate Owned and Leased

	Approximate Square Footage At December 31,
	2006						2005
(In thousands)	Owned		Leased		Total		Owned		Leased		Total
Retail
RadioShack company- operated stores		18		11,134		11,152		18		12,395		12,413
Kiosks		--		78		78		--		70		70
Canadian company- operated stores		--		23		23		--		22		22

Support Operations
Manufacturing		134		320		454		196		208		404
Distribution centers and office space		2,229		1,750		3,979		2,538		1,984		4,522
		2,381		13,305		15,686		2,752		14,679		17,431

Below is a complete listing at December 31, 2006, of our top 40 dominant marketing areas for RadioShack company-operated stores, kiosks and dealers.

	Dominant Marketing Area	Company Stores, Kiosks and Dealers
1	New York City	386
2	Los Angeles	306
3	Chicago	169
4	Philadelphia	164
5	Fort Worth-Dallas	163
6	Washington, DC	139
7	Houston	131
8	Boston	129
9	San Francisco-Oakland-San Jose	126
10	Atlanta	115
11	Denver	101
12	Seattle-Tacoma	100
13	Phoenix	96
14	Cleveland	95
15	Minneapolis-St. Paul	94
16	Tampa-St. Petersburg	88
17	Miami-Ft. Lauderdale	87
18	Detroit	85
19	St. Louis	78
20	Orlando-Daytona Beach-Melbourne	77
21	Sacramento-Stockton-Modesto	73
22	Pittsburgh	71
23	Portland, Oregon	66
24	Salt Lake City	65
25	Indianapolis	64
26	Raleigh-Durham	61
27	Baltimore	59
28	Charlotte	55
29	Hartford-New Haven	55
30	Norfolk-Portsmouth-Newport News	55
31	Cincinnati	54
32	Greenville-Spartanburg-Asheville	51
33	Kansas City	51
34	Nashville	50
35	San Antonio	50
36	Milwaukee	49
37	San Diego	48
38	Albuquerque-Santa Fe	46
39	Columbus	44
40	Grand Rapids-Kalamazoo-Battle Creek	43
	TOTAL:	3,839

ITEM 3. 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 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 is not approved, 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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders during the fourth quarter of 2006.

EXECUTIVE OFFICERS OF THE REGISTRANT (SEE ITEM 10 OF PART III).

The following is a list, as of February 16, 2007, of our executive officers and their ages and positions.

Name	Position (Date Appointed to Current Position)	Age
Julian C. Day (1)	Chief Executive Officer and Chairman of the Board (July 2006)	54
James F. Gooch (2)	Executive Vice President and Chief Financial Officer (August 2006)	39
David S. Goldberg (3)	Senior Vice President - General Counsel and Corporate Secretary (December 2005)	44
David P. Johnson (4)	Senior Vice President - Corporate Controller (May 2002)	54
Cara D. Kinzey (5)	Senior Vice President - Information Technology (March 2006)	40
Wesley V. Lowzinski (6)	Senior Vice President - General Merchandise Manager (May 2006)	54
John G. Ripperton (7)	Senior Vice President - Supply Chain (August 2006)	53
Gary M. Stone (8)	Senior Vice President - Real Estate (November 2005)	58

There are no family relationships among the executive officers listed, and there are no undisclosed arrangements or understandings under which any of them were appointed as executive officers. All executive officers of RadioShack Corporation are appointed by the Board of Directors to serve until their successors are appointed.

(1)

Mr. Day was appointed Chief Executive Officer and Chairman of the Board of RadioShack in July 2006. Prior to his appointment, Mr. Day was a private investor. Mr. Day became the President and Chief Operating Officer of Kmart Corporation (a mass merchandising company) in March 2002 and served as Chief Executive Officer of Kmart from January 2003 to October 2004. Following the merger of Kmart and Sears, Roebuck and Co. (a broadline retailer), Mr. Day served as a Director of Sears Holding Corporation (the parent company of Sears, Roebuck and Co. and Kmart Corporation) until April 2006. Mr. Day joined Sears as Executive Vice President and Chief Financial Officer in 1999, and was promoted to Chief Operating Officer and a member of the Office of the Chief Executive, where he served until 2002.

(2)

Mr. Gooch was appointed Executive Vice President and Chief Financial Officer in August 2006. Previously, Mr. Gooch served as Executive Vice President - Chief Financial Officer of Entertainment Publications (a company of InterActiveCorp) (a merchant promotions and consumer savings company) from May 2005 to August 2006. From 1996 to May 2005, Mr. Gooch served in various positions at Kmart Corporation (a mass merchandising company), including Vice President, Controller, Vice President, Treasurer and Vice President, Corporate Financial Planning and Analysis.

(3)

Mr. Goldberg has served as Senior Vice President, General Counsel and Corporate Secretary since December 2005. Previously, Mr. Goldberg served as Vice President - Law, Corporate Secretary and Acting General Counsel from May 2005 to December 2005, as Vice President - Law from December 2000 to December 2003, and as Assistant Corporate Secretary from December 2003 to May 2005.

(4)

Mr. Johnson has served as Senior Vice President - Corporate Controller since May 2006. Previously, Mr. Johnson served as Senior Vice President - Chief Accounting Officer from April 2005 to May 2006 and as Senior Vice President and Controller of RadioShack Corporation from May 2002 to April 2005. Mr. Johnson also served as Acting Chief Financial Officer from July 2004 through April 2005.

(5)

Ms. Kinzey has served as Senior Vice President - Information Technology since March 2006. Before joining RadioShack, Ms. Kinzey served as Vice President - Membership, Member Services and Credit from July 2003 to March 2006 for SAM’S CLUB (a warehouse club) and as Vice President - HR/Finance/Corporate Systems from 2002 to 2003 and Vice President of Store Systems from 2001 to 2002 for Wal-Mart Stores, Inc. (a discount retailer).

(6)

Mr. Lowzinski has served as Senior Vice President - General Merchandise Manager since May 2006. Mr. Lowzinski served as Division Vice President - Division Merchandising Manager from December 2005 to May 2006. Prior to joining RadioShack, Mr. Lowzinski was Global Product Merchant for The Home Depot, Inc. (a home improvement retailer) from 2004 to December 2005, and was a Senior Buyer: Audio for Circuit City Stores, Inc. (a consumer electronics retailer) from 1998 to 2004.

(7)	Mr. Ripperton has served as Senior Vice President - Supply Chain since August 2006. Previously, Mr. Ripperton served as Vice President - Distribution from 2002 to August 2006.

(8)	Mr. Stone has served as Senior Vice President - Real Estate since November 2005. From 2002 to November 2005, Mr. Stone was a consultant.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

PRICE RANGE OF COMMON STOCK

Our common stock is listed on the New York Stock Exchange and trades under the symbol "RSH." The following table presents the high and low trading prices for our common stock, as reported in the composite transaction quotations of consolidated trading for issues on the New York Stock Exchange, for each quarter in the two years ended December 31, 2006.

						Dividends
Quarter Ended		High		Low		Declared
December 31, 2006	$	20.40	$	16.49	$	0.25
September 30, 2006		19.71		13.76		--
June 30, 2006		18.83		14.00		--
March 31, 2006		22.90		18.74		--

December 31, 2005	$	25.00	$	20.55	$	--
September 30, 2005		27.24		22.81		0.25
June 30, 2005		26.43		23.11		--
March 31, 2005		34.48		23.75		--

HOLDERS OF RECORD

At February 16, 2007, there were 21,316 holders of record of our common stock.

DIVIDENDS

The Finance and Strategic Transactions Committee of the Board of Directors annually reviews our dividend policy. On November 6, 2006, our Board of Directors declared an annual dividend of $0.25 per share. The dividend was paid on December 20, 2006, to stockholders of record on December 1, 2006.

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⁾
October 1 - 31, 2006	---	$	---	---	$	209,909,275
November 1 - 30, 2006	---	$	---	---	$	209,909,275
December 1 - 31, 2006	---	$	---	---	$	209,909,275
Total	---	$	---	---

⁽¹⁾The total number of shares purchased would include all repurchases made during the periods indicated. In October, November and December 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 February 16, 2007, management had not determined if share repurchases under the $250 million program should be resumed.

ITEM 6. SELECTED FINANCIAL DATA.

SELECTED FINANCIAL DATA (UNAUDITED)

RADIOSHACK CORPORATION AND SUBSIDIARIES

	Year Ended December 31,
(Dollars and shares in millions, except per share amounts, ratios, locations and square footage)		2006			2005			2004			2003			2002
Statements of Income Data
Net sales and operating revenues	$	4,777.5		$	5,081.7		$	4,841.2		$	4,649.3		$	4,577.2
Operating income	$	156.9		$	349.9		$	558.3		$	483.7		$	425.4
Net income	$	73.4		$	267.0		$	337.2		$	298.5		$	263.4
Earnings per share:
Basic	$	0.54		$	1.80		$	2.09		$	1.78		$	1.50
Diluted	$	0.54		$	1.79		$	2.08		$	1.77		$	1.45
Shares used in computing earnings per share:
Basic		136.2			148.1			161.0			167.7			173.0
Diluted		136.2			148.8			162.5			168.9			179.3
Gross profit as a percent of sales		46.7	%		46.7	%		50.3	%		49.8	%		48.9	%
SG&A expense as a percent of sales		39.8	%		37.4	%		36.7	%		37.4	%		37.8	%
Operating income as a percent of sales		3.3	%		6.9	%		11.5	%		10.4	%		9.3	%
Balance Sheet Data
Inventories, net	$	752.1		$	964.9		$	1,003.7		$	766.5		$	971.2
Total assets	$	2,070.0		$	2,205.1		$	2,516.7		$	2,243.9		$	2,227.9
Working capital	$	615.4		$	641.0		$	817.7		$	808.5		$	878.7
Capital structure:
Current debt	$	194.9		$	40.9		$	55.6		$	77.4		$	36.0
Long-term debt	$	345.8		$	494.9		$	506.9		$	541.3		$	591.3
Total debt	$	540.7		$	535.8		$	562.5		$	618.7		$	627.3
Total debt, net of cash and cash equivalents	$	68.7		$	311.8		$	124.6		$	(16.0	)	$	180.8
Stockholders' equity	$	653.8		$	588.8		$	922.1		$	769.3		$	728.1
Total capitalization ⁽¹⁾	$	1,194.5		$	1,124.6		$	1,484.6		$	1,388.0		$	1,355.4
Long-term debt as a % of total capitalization ⁽¹⁾		29.0	%		44.0	%		34.1	%		39.0	%		43.6	%
Total debt as a % of total capitalization ⁽¹⁾		45.3	%		47.6	%		37.9	%		44.6	%		46.3	%
Book value per share at year end	$	4.81		$	4.36		$	5.83		$	4.73		$	4.24
Financial Ratios
Return on average stockholders' equity		11.8	%		35.3	%		39.9	%		39.9	%		35.0	%
Return on average assets		3.4	%		11.3	%		14.2	%		13.4	%		11.8	%
Annual inventory turnover		2.9			2.7			2.6			2.8			2.4
Other Data
EBITDA ⁽²⁾	$	285.1		$	473.7		$	659.7		$	575.7		$	520.1
Dividends declared per share	$	0.25		$	0.25		$	0.25		$	0.25		$	0.22
Capital expenditures	$	91.0		$	170.7		$	229.4		$	189.6		$	106.8
Number of retail locations at year end		6,835			7,460			7,433			7,051			7,213
Average square footage per RadioShack company-operated store		2,496			2,489			2,529			2,450			2,400
Comparable store sales (decrease) increase		(5.6	%)		0.9	%		3.2	%		2.4	%		(1.1	%)
Shares outstanding		135.8			135.0			158.2			162.5			171.7

This table should be read in conjunction with MD&A and the Consolidated Financial Statements and related Notes.

⁽¹⁾ Capitalization is defined as total debt plus total stockholders' equity.

⁽²⁾ EBITDA, a non-GAAP financial measure, is defined as earnings before interest, taxes, depreciation and amortization. The comparable financial measure to EBITDA under GAAP is net income. EBITDA is used by management to evaluate the operating performance of our business for comparable periods. EBITDA should not be used by investors or others as the sole basis for formulating investment decisions as it excludes a number of important items. We compensate for this limitation by using GAAP financial measures as well in managing our business. In the view of management, EBITDA is an important indicator of operating performance because EBITDA excludes the effects of financing and investing activities by eliminating the effects of interest and depreciation costs.

The following table is a reconciliation of EBITDA to net income.

	Year Ended December 31,
(In millions)		2006			2005			2004			2003			2002
Reconciliation of EBITDA to Net Income
EBITDA	$	285.1		$	473.7		$	659.7		$	575.7		$	520.1

Interest expense, net of interest income		(36.9	)		(38.6	)		(18.2	)		(22.9	)		(34.4	)
Provision for income taxes		(38.0	)		(51.6	)		(204.9	)		(174.3	)		(161.5	)
Depreciation and amortization		(128.2	)		(123.8	)		(101.4	)		(92.0	)		(94.7	)
Other (loss) income, net		(8.6	)		10.2			2.0			12.0			33.9
Cumulative effect of change in accounting principle, net of $1.8 million tax benefit in 2005		--			(2.9	)		--			--			--
Net income	$	73.4		$	267.0		$	337.2		$	298.5		$	263.4

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS (“MD&A”).

This MD&A section discusses our results of operations, liquidity and financial condition, risk management practices, critical accounting policies, and estimates and certain factors that may affect our future results, including economic and industry-wide factors. Our MD&A should be read in conjunction with our consolidated financial statements and accompanying notes, included in this Annual Report on Form 10-K, as well as the Risk Factors set forth in Item 1A above.

OVERVIEW

RadioShack is primarily a specialty retailer of consumer electronics products and services. We seek to differentiate ourselves from our various competitors by providing cost-effective solutions to meet the routine electronics needs and distinct electronics wants of our customers. 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 day-to-day 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 that have an adequate return or are operationally necessary

TURNAROUND PROGRAM REVIEW

Due to negative trends that developed in our business during calendar year 2005, we announced a turnaround program on February 17, 2006, that contained four key components:

·	Update our inventory