**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 March 31, 2007
 
 **OR**
 
 ****  **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
 **________________________**
 
 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
        Exchange Act). Yes __ No X
 
 The
        number of
        shares outstanding of the issuer's Common Stock, $1 par value, on April 20,
        2007
        was 135,558,963.





**TABLE
        OF
        CONTENTS**
 
 Page**PART
                  I****-
                  FINANCIAL INFORMATION**Item
                  1.
              Financial
                  Statements (Unaudited)
              3Notes
                  to
                  Consolidated Financial Statements (Unaudited)
              6Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              11Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market Risk
              19Item
                  4.
              Controls
                  and
                  Procedures
              19**PART****II**Item
                  1.
              Legal
                  Proceedings
              20Item
                  1a.
              Risk
                  Factors
              20Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              21Item
                  5.
              Other
                  Information
              21Item
                  6.
              Exhibits
              21Signatures
              22Index
                  to
                  Exhibits
              23


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          of Contents


**PART
      I -
      FINANCIAL INFORMATION**





**ITEM
      1.
      FINANCIAL STATEMENTS**





**RADIOSHACK
      CORPORATION AND SUBSIDIARIES**


**Consolidated
      Statements of Income (Unaudited)**




**Three
                Months Ended****March
                31,****(In
                millions, except per share amounts)**
            
            
            **2007**
            
            
            **2006****Net
                sales and operating revenues**
            
            $
            992.3
            
            $
            1,160.0Cost
                of
                products sold
            
            
            475.9
            
            
            599.4**Gross
                profit**
            
            
            516.4
            
            
            560.6Operating
                expenses:Selling,
                general and administrative
            
            
            412.0
            
            
            495.7Depreciation
                and amortization
            
            
            29.2
            
            
            32.0Impairment
                of
                long-lived assets
            
            
            0.6
            
            
            8.9Total
                operating expenses
            
            
            441.8
            
            
            536.6**Operating
                income**
            
            
            74.6
            
            
            24.0Interest
                income
            
            
            6.5
            
            
            0.8Interest
                expense
            
            
            (10.6
            )
            
            (10.6
            )Other
                loss
            
            
            (1.0
            )
            
            (0.6
            )**Income
                before income taxes**
            
            
            69.5
            
            
            13.6Income
                tax
                provision
            
            
            27.0
            
            
            5.2**Net
                income**
            
            $
            42.5
            
            $
            8.4**Net
                income per share (see Note 2):**Basic
            
            $
            0.31
            
            $
            0.06Diluted
            
            $
            0.31
            
            $
            0.06Shares
                used
                in computing net income per share:Basic
            
            
            136.2
            
            
            135.8Diluted
            
            
            137.1
            
            
            135.8





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


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**RADIOSHACK
      CORPORATION AND SUBSIDIARIES**


**Consolidated
      Balance Sheets (Unaudited)**




**March
                  31,**
              
              **December
                  31,**
              
              **March
                  31,****(In
                  millions, except for share amounts****)**
              
              **2007**
              
              **2006**
              
              **2006****Assets**Current
                  assets:Cash
                  and cash
                  equivalents
              
              $
              463.2
              
              $
              472.0
              
              $
              45.4Accounts
                  and
                  notes receivable, net
              
              
              168.8
              
              
              247.9
              
              
              265.4Inventories
              
              
              650.8
              
              
              752.1
              
              
              960.0Other
                  current
                  assets
              
              
              131.1
              
              
              127.6
              
              
              148.1**Total
                  current assets**
              
              
              1,413.9
              
              
              1,599.6
              
              
              1,418.9Property,
                  plant and equipment, net
              
              
              365.8
              
              
              386.3
              
              
              455.8Other
                  assets,
                  net
              
              
              104.1
              
              
              84.1
              
              
              104.1**Total
                  assets**
              
              $
              1,883.8
              
              $
              2,070.0
              
              $
              1,978.8**Liabilities
                  and Stockholders’ Equity**Current
                  liabilities:Short-term
                  debt, including current maturities of long-term debt
              
              $
              178.5
              
              $
              194.9
              
              $
              163.7Accounts
                  payable
              
              
              182.3
              
              
              254.5
              
              
              211.9Accrued
                  expenses and other current liabilities
              
              
              330.6
              
              
              442.2
              
              
              330.3Income
                  taxes
                  payable
              
              
              3.6
              
              
              92.6
              
              
              42.5**Total
                  current liabilities**
              
              
              695.0
              
              
              984.2
              
              
              748.4Long-term
                  debt, excluding current maturities
              
              
              342.0
              
              
              345.8
              
              
              491.9Other
                  non-current liabilities
              
              
              147.3
              
              
              86.2
              
              
              127.4**Total
                  liabilities**
              
              
              1,184.3
              
              
              1,416.2
              
              
              1,367.7Commitments
                  and contingent liabilities (see Notes 5 and 6)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
              
              
              191.0Additional
                  paid-in capital
              
              
              98.3
              
              
              92.6
              
              
              92.7Retained
                  earnings
              
              
              1,830.6
              
              
              1,780.9
              
              
              1,749.8Treasury
                  stock, at cost; 55,594,000, 55,196,000
                and
                  55,710,000 shares, respectively
              
              
              (1,418.4
              )
              
              (1,409.1
              )
              
              (1,422.2
              )Accumulated
                  other comprehensive loss
              
              
              (2.0
              )
              
              (1.6
              )
              
              (0.2
              )**Total
                  stockholders’ equity**
              
              
              699.5
              
              
              653.8
              
              
              611.1**Total
                  liabilities and stockholders’ equity**
              
              $
              1,883.8
              
              $
              2,070.0
              
              $
              1,978.8


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


4
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          of Contents


**RADIOSHACK
      CORPORATION AND SUBSIDIARIES**


**Consolidated
      Statements of Cash Flows (Unaudited)**







**Three
                Months Ended****March
                31,****(****In
                millions)**
            
            **2007**
            
            **2006****Cash
                flows from operating activities:**Net
                income
            
            $
            42.5
            
            $
            8.4Adjustments
                to reconcile net income to net cash provided by (used in)operating
                activities:Depreciation
                and amortization
            
            
            29.2
            
            
            32.0Provision
                for
                credit losses and bad debts
            
            
            0.3
            
            
            0.2Impairment
                of
                long-lived assets
            
            
            0.6
            
            
            8.9Other
                items
            
            
            1.6
            
            
            3.9Changes
                in
                operating assets and liabilities:Accounts
                and
                notes receivable
            
            
            79.1
            
            
            43.8Inventories
            
            
            101.4
            
            
            4.9Other
                current
                assets
            
            
            (10.0
            )
            
            (26.7
            )Accounts
                payable, accrued expenses, income taxes payable andother
            
            
            (196.9
            )
            
            (358.0
            )Net
                cash
                provided by (used in) operating activities
            
            
            47.8
            
            
            (282.6
            )**Cash
                flows from investing activities:**Additions
                to
                property, plant and equipment
            
            
            (10.7
            )
            
            (27.2
            )Proceeds
                from
                sale of property, plant and equipment
            
            
            1.3
            
            
            0.8Other
                investing activities
            
            
            (0.3
            )
            
            (0.2
            )Net
                cash used
                in investing activities
            
            
            (9.7
            )
            
            (26.6
            )**Cash
                flows from financing activities:**Purchases
                of
                treasury stock
            
            
            (45.2
            )
            
            --Sale
                of
                treasury stock to employee benefit plans
            
            
            --
            
            
            7.5Proceeds
                from
                exercise of stock options
            
            
            19.9
            
            
            0.1Changes
                in
                short-term borrowings and outstanding checks in excessof
                cash
                balances, net
            
            
            (21.6
            )
            
            125.5Reductions
                of
                long-term borrowings
            
            
            --
            
            
            (2.5
            )Net
                cash
                (used in) provided by financing activities
            
            
            (46.9
            )
            
            130.6**Net
                decrease in cash and cash equivalents**
            
            
            (8.8
            )
            
            (178.6
            )Cash
                and cash
                equivalents, beginning of period
            
            
            472.0
            
            
            224.0Cash
                and cash
                equivalents, end of period
            
            $
            463.2
            
            $
            45.4








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


5
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          of Contents


**RADIOSHACK
      CORPORATION AND SUBSIDIARIES**


**Notes
      to
      Consolidated Financial Statements (Unaudited)**





**NOTE
      1 -
      BASIS OF PRESENTATION**


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, 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. However, our
      operating results for the three months ended March 31, 2007 and 2006, 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, 2006.





**NOTE
      2 -
      BASIC AND DILUTED INCOME PER SHARE**


Basic
      income per
      share is computed based only on the weighted average number of common shares
      outstanding for each period presented. Diluted 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 earnings. The following table
      reconciles the numerator and denominator used in the basic and diluted income
      per share calculations for the periods presented:




Three
                months
                ended March 31,2007
            
            2006Numerator:Net
                income
            
            $
            42.5
            
            $
            8.4Denominator:Weighted
                average shares
            
            
            136.2
            
            
            135.8Incremental
                common shares attributable to stock option plans
            
            
            0.9
            
            
            --Weighted
                average shares for diluted net income per share
            
            
            137.1
            
            
            135.8Basic
                income
                per share
            
            $
            0.31
            
            $
            0.06Diluted
                income per share
            
            $
            0.31
            
            $
            0.06





Options
      to purchase
      12.7 million and 19.6 million shares of common stock for the three months ended
      March 31, 2007 and 2006, respectively, were not included in the computation
      of
      diluted 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 be anti-dilutive.





**NOTE** **3
      -
      COMPREHENSIVE INCOME**


Comprehensive
      income for the three months ended March 31, 2007 and 2006, was $42.0 million
      and
      $7.9 million, respectively. The other components of comprehensive income in
      both
      2007 and 2006, aside from net income for the periods reported, were unrealized
      losses on securities and foreign currency translation adjustments.





**NOTE
      4 -
      RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**


In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 157, "Fair Value
      Measurements" ("SFAS 157"). SFAS 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
      to 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




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provisions
      of SFAS 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
      February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits
      entities to choose to measure certain financial instruments and other eligible
      items at fair value when the items are not otherwise currently required to
      be
      measured at fair value. Under SFAS 159, the decision to measure items at fair
      value is made at specified election dates on an irrevocable
      instrument-by-instrument basis. Entities electing the fair value option would
      be
      required to recognize changes in fair value in earnings and to expense upfront
      cost and fees associated with the item for which the fair value option is
      elected. Entities electing the fair value option are required to distinguish,
      on
      the face of the statement of financial position, the fair value of assets and
      liabilities for which the fair value option has been elected and similar assets
      and liabilities measured using another measurement attribute. If elected, SFAS
      159 will be effective as of the beginning of the first fiscal year that begins
      after November 15, 2007, with earlier adoption permitted if all of the
      requirements of SFAS 157 are adopted. The impact of the adoption of SFAS 159
      will be dependent on the extent to which we choose to elect to measure eligible
      items at fair value.





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 more likely than not will be sustained on an 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. Any transition adjustment
      recognized on the date of adoption will be recorded as an adjustment to retained
      earnings as of the beginning of the adoption period. We adopted FIN 48 on
      January 1, 2007. See Note 7 - “Income Taxes” for a discussion of the impact of
      FIN 48.





**NOTE
      5 -
      LITIGATION**


We
      and certain of our former and current directors and officers are currently
      parties to two putative class action lawsuits, styled *Damore
      v.
      RadioShack et al* .
      and *Hawana
      v.
      RadioShack et al* .,
      which were filed
      in the United States District Court for the Northern District of Texas, Fort
      Worth Division, on March 16, 2007, and March 27, 2007, respectively. These
      actions purport to be brought on behalf of all persons who purchased
      RadioShack’s common stock between January 14, 2003, and June 7, 2006. The
      complaints allege, among other things, that we failed to disclose material
      adverse facts about our financial well-being, business relationships and
      prospects. The complaints seek, among other things, a declaration that the
      actions are a proper class action, as well as awards for damages and interest,
      reasonable costs and expenses (including attorneys’ and experts’ fees). We
      believe the alleged causes of action are without merit and we intend to
      vigorously defend against these cases.





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, which we recorded in
      the
      second and third quarters of 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.




**NOTE
      6 -
      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 arising from leases 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 March 31, 2007, assuming no projected
      sublease income, is approximately $110 million. On February 27, 2007, CompUSA
      announced the closure of approximately 126 of its stores as part of a
      nationwide




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realignment
      of its
      operations, some of which are stores for which we have guaranteed the leases.
      We
      are continuing to monitor this situation; however, at this time we do not
      believe there will be a material impact on our financial statements from any
      fulfillment of these contingencies.





**NOTE
      7 -
      INCOME TAXES**


RadioShack
      Corporation and its U.S. subsidiaries join in the filing of a U.S. federal
      consolidated income tax return. The Internal Revenue Service (“IRS”) concluded
      its examination of our consolidated federal income tax returns for the tax
      years
      1998 through 2001 and issued a Revenue Agents Report (“RAR”) on August 30, 2004.
      Currently, we have either agreed with the conclusions of the RAR or resolved
      any
      issues in disagreement with the IRS Office of Appeals (“Office of Appeals”),
      with the exception of a jobs tax credit issue which is still before the Office
      of Appeals. The U.S. federal statute of limitations remains open for the 1998
      tax year and beyond. Foreign and U.S. state jurisdictions have statutes of
      limitations generally ranging from 3 to 5 years. Our tax returns are currently
      under examination in various U.S., state and foreign jurisdictions.





We
      adopted the provisions of FIN 48 effective January 1, 2007. As a result of
      the
      implementation of FIN 48, we recognized a $7.2 million net decrease in
      unrecognized tax benefits with a corresponding increase in retained earnings.
      The total effect of the adoption was a $19.8 million increase in our non-current
      deferred tax assets, a $53.0 million decrease in income taxes payable to
      reclassify unrecognized tax benefits to non-current liabilities, a $65.6
      million increase in our non-current liabilities representing the liability
      for
      unrecognized tax benefits, and the previously mentioned $7.2 million increase
      to
      retained earnings.




As
      of January 1, 2007, after the implementation of FIN 48, our unrecognized tax
      benefits were $49.0 million. The amount, if recognized, that would affect the
      effective tax rate is $35.7 million.





We
      recognize accrued interest and penalties associated with uncertain tax positions
      as part of the income tax provision. As of January 1, 2007, accrued interest
      expense associated with uncertain tax positions was $16.6 million.





It
      is expected that the amount of unrecognized tax benefits will change during
      the
      next year; however, we do not expect the change to have a significant impact
      on
      our results of operations or our financial position.





**NOTE
      8 -
      FEDERAL EXCISE TAX**


In
      May 2006, the IRS established refund procedures for federal telecommunications
      excise tax (“excise tax”) paid by taxpayers in prior years. In December 2006,
      the IRS provided clarification regarding which taxpayers were eligible to
      request refunds of excise taxes. In the quarter ended March 31, 2007, we
      determined that we were entitled to a refund in the amount of $14.0 million,
      which we recorded as a reduction to our cost of products sold, plus $1.4 million
      in interest income. We will claim this refund in the form of a tax credit when
      our 2006 federal income tax return is filed in September 2007.





**NOTE
      9 -
      IMPAIRMENT OF LONG-LIVED ASSETS**


In
      March 2007, we recorded a $0.6 million impairment of long-lived assets relating
      primarily to our company-operated stores. We
      recorded this
      amount based on the remaining estimated future cash flows of the long-lived
      assets.





In
      February 2006 our board of directors approved the closure of 400 to 700
      RadioShack company-operated stores. As of March 31, 2006, we had identified
      481
      specific stores for closure, thus indicating that the carrying amount of some
      of
      the identified stores’ long-lived assets would not be recoverable. 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 an $8.9 million impairment loss for the three months ended March
      31, 2006.





**NOTE
      10 -
      STOCK REPURCHASE PROGRAM**


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
      repurchased 1.8
      million shares or $46.5 million of our common stock during the three months
      ended March 31, 2007 .
      We used cash of
      $45.2 million to repurchase this stock, with the difference to be paid in April
      2007. As of March 31, 2007, there was $163.4 million available for share
      repurchases under the $250 million share repurchase program.





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**NOTE
      11 -
      CORPORATE HEADCOUNT REDUCTION**


In
      connection with a reduction in corporate support staff of approximately 280,
      we
      recorded a pre-tax charge of approximately $8.5 million for employee seperation
      costs. This charge was recorded in SG&A.




**NOTE
          12 -
          TURNAROUND RESTRUCTURINGS**
 At
        March 31, 2007,
        the balance in the restructuring reserve related to the 2006 turnaround program
        was $7.4 million. This reserve represents the expected costs to be paid in
        connection with the remaining severance and real estate lease obligations.
        During the quarter ended March 31, 2007, $3.1 million was applied against
        this reserve.





**NOTE
      13 -
      SEGMENT REPORTING**


We
      have two reportable segments, RadioShack company-operated stores and kiosks.
      RadioShack consists solely of our 4,442 company-operated retail stores, all
      operating under the RadioShack brand name. Kiosks consist of our network of
      763
      kiosks, primarily located in major shopping malls and SAM’S CLUB locations. Both
      of our reportable segments engage in the sale of consumer electronics 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
      in the
      other category below include our dealer network, e-commerce, third-party service
      centers, manufacturing, foreign operations and commercial sales.


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Three
                    Months
                    Ended March 31,(In
                    millions)
                
                2007
                
                2006(1)**Net
                    sales and operating revenues:**RadioShack
                    company-operated stores
                
                $
                848.4
                
                $
                996.1Kiosks
                
                
                77.3
                
                
                78.1Other
                
                
                66.6
                
                
                85.8$
                992.3
                
                $
                1,160.0**Operating
                    income:**RadioShack
                    company-operated stores(2)
                
                $
                178.1
                
                $
                167.1Kiosks
                
                
                4.6
                
                
                (2.5
                )Other(3)
                
                
                8.9
                
                
                (1.1
                )191.6
                
                
                163.5Unallocated(4)
                
                
                (117.0
                )
                
                (139.5
                )**Operating
                    income**
                
                
                74.6
                
                
                24.0Interest
                    income
                
                
                6.5
                
                
                0.8Interest
                    expense
                
                
                (10.6
                )
                
                (10.6
                )Other
                    (loss)
                    income
                
                
                (1.0
                )
                
                (0.6
                )Income
                    before
                    income taxes
                
                $
                69.5
                
                $
                13.6**Depreciation
                    and amortization:**RadioShack
                    company-operated stores
                
                $
                13.5
                
                $
                14.2Kiosks
                
                
                1.6
                
                
                2.7Other
                
                
                0.5
                
                
                0.615.6
                
                
                17.5Unallocated(5)
                
                
                13.6
                
                
                14.5$
                29.2
                
                $
                32.0**Capital
                    expenditures:**RadioShack
                    company-operated stores
                
                $
                3.8
                
                $
                14.0Kiosks
                
                
                --
                
                
                0.8Other
                
                
                0.1
                
                
                0.83.9
                
                
                15.6Unallocated(6)
                
                
                6.8
                
                
                11.6$
                10.7
                
                $
                27.2




(1)
                Amounts
                    have
                    been retrospectively adjusted to conform to current year presentations.
                    Certain prior year inter-company
                    amounts have been reallocated between the segments and
                    Unallocated.(2)
                Operating
                    income for the three months ended March 31, 2007, includes a
                    $14.0 million
                    federal excise taxrefund
                    and
                    $0.4 million impairment of long-lived assets on furniture, fixtures
                    and
                    leasehold improvements.Operating
                    income for the three months ended March 31, 2006, includes an
                    $8.9 million
                    charge for impairment oflong-lived
                    assets on furniture, fixtures and leasehold improvements for
                    stores
                    identified for closure in July 2006.(3)
                Operating
                    income for the three months ended March 31, 2007, includes $0.2
                    million
                    for the impairment of long-lived
                    assets
                    on machinery and equipment.(4)
                The
                    unallocated category included in operating income relates to
                    our overhead
                    and corporate expenses that arenot
                    allocated
                    to the separate reportable segments for management reporting
                    purposes.
                    Unallocated costsinclude
                    corporate departmental expenses such as labor and benefits, as
                    well as
                    advertising, insurance,distribution
                    and information technology costs.(5)
                Depreciation
                    and amortization included in the unallocated category primarily
                    relate to
                    information technologyassets.(6)
                Capital
                    expenditures included in the unallocated category primarily relate
                    to
                    information technology
                    assets.


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





This
      MD&A
      section of our Quarterly Report on Form 10-Q discusses our results of
      operations, liquidity and financial condition, and certain factors that may
      affect our future results, including 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 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


·
            Continually reduce costs throughout the
                organization


·
            Allocate the dollars generated from operations appropriately by investing
                only in projects that have an adequate return or are
              operationally necessary





**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, and operating
      income.





**Net
      Sales
      and Operating Revenues Metrics**





As
      a retailer, we consider profitable growth in revenue to be one of the key
      indicators of our overall financial performance. We examine our revenue by
      using
      several key metrics, including overall change in net sales and operating
      revenues and in comparable store sales performance, as well as the related
      gross
      profit derived from these sales.





The
      change in net
      sales and operating revenues, coupled with the review of gross profit dollars,
      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
      recorded sales.





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





Three
                Months
                Ended March 31,2007
            
            2006
            
            2005Consolidated
                net sales and operatingrevenues
                (decrease) growth
            
            
            (14.5
            %)
            
            3.3
            %
            
            2.8
            %Comparable
                store sales decrease
            
            
            (9.2
            %)
            
            (0.5
            %)
            
            (1.4
            %)





Both
      consolidated
      net sales and operating revenues and comparable store sales declined in 2007,
      in
      part due to a sales decrease within our RadioShack company-operated stores
      segment’s wireless and personal electronics platforms. The consolidated net
      sales and operating revenues decline was also impacted by the closure of 481
      company-operated stores in July 2006.





**Gross
      Profit and Gross Margin Metrics**





We
      view our gross profit dollars and gross margin as key metrics of our financial
      performance, as they indicate the extent to which we are able to manage our
      product costs and sales volume.





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




Three
                Months
                Ended March 31,2007
            
            2006
            
            2005Gross
                profit
            
            $
            516.4
            
            $
            560.6
            
            $
            566.2Gross
                margin
            
            
            52.0
            %
            
            48.3
            %
            
            50.4
            %





Our
      first quarter
      gross margin improved due to a mix shift toward higher gross margin products
      and
      improved inventory management. In addition, a $14.0 million refund of federal
      excise taxes favorably increased our gross margin by 1.4 percentage
      points.





**Operating
      Income Metrics**





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





Three
                Months
                Ended March 31,(In
                millions)
            
            2007
            
            2006(1)
            
            2005(1)RadioShack
                company-operated stores(2)
            
            $
            178.1
            
            $
            167.1
            
            $
            218.0Kiosks
            
            
            4.6
            
            
            (2.5
            )
            
            (3.6
            )Other(3)
            
            
            8.9
            
            
            (1.1
            )
            
            7.5191.6
            
            
            163.5
            
            
            221.9Unallocated
            
            
            (117.0
            )
            
            (139.5
            )
            
            (135.7
            )**Operating
                income**
            
            $
            74.6
            
            $
            24.0
            
            $
            86.2





(1)
              Amounts
                  have
                  been retrospectively adjusted to conform to current year presentations.
                  Certain prior year inter-company
                  amounts have been reallocated between the segments and
                  Unallocated.(2)
              Operating
                  income for the three months ended March 31, 2007, includes a $14.0
                  million
                  federal excise taxrefund
                  and
                  $0.4 million impairment of long-lived assets on furniture, fixtures
                  and
                  leasehold improvements.Operating
                  income for the three months ended March 31, 2006, includes an $8.9
                  million
                  charge for impairment oflong-lived
                  assets on furniture, fixtures and leasehold improvements for stores
                  closed
                  in July 2006.(3)
              Operating
                  income for the three months ended March 31, 2007, includes $0.2
                  million
                  for the impairment of long-lived
                  assets
                  on machinery and equipment.




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





**RESULTS
      OF
      OPERATIONS**





**RadioShack
      Retail Outlets**





The
      table below
      shows our retail locations at March 31, 2007, allocated among domestic
      RadioShack company-operated stores, kiosks and dealer and other
      outlets.





March
                31,
            
            December
                31,
            
            September
                30,
            
            June
                30,
            
            March
                31,2007
            
            2006
            
            2006
            
            2006
            
            2006RadioShack
                company-operated
                stores(1)
            
            
            4,442
            
            
            4,467
            
            
            4,460
            
            
            4,746
            
            
            4,933Kiosks(2)
            
            
            763
            
            
            772
            
            
            778
            
            
            777
            
            
            778Dealer
                and
                other outlets(3)
            
            
            1,560
            
            
            1,596
            
            
            1,620
            
            
            1,635
            
            
            1,662Total
                number
                of retail locations
            
            
            6,765
            
            
            6,835
            
            
            6,858
            
            
            7,158
            
            
            7,373


(1)
              During
                  the
                  past four quarters, we closed a total of 491 RadioShack company-operated
                  stores in the U.S., net ofnew
                  store
                  openings and relocations. This decline resulted primarily from
                  the closure
                  of 481 locations in July2006,
                  as well
                  as our decision not to renew leases on other locations that failed
                  to meet
                  our financial return goals.(2)
              Kiosks
                  decreased by 15 locations during the past four quarters. SAM’S CLUB has
                  the unconditional right toassume
                  the
                  operation of up to 75 kiosk locations (in total), as well as additional
                  kiosks in the event we fail to


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meet
                  certain
                  specified performance metrics. They exercised this unconditional
                  right to
                  assume operation of 44kiosk
                  locations during 2005 that were previously operated by
                  us.(3)
              During
                  the
                  past four quarters, we closed 102 dealer and other outlets, primarily
                  related to dealers (typically byterminating
                  our relationship with the dealers), net of new outlet openings
                  and
                  conversions to RadioShackcompany-operated
                  stores. This declining trend is due to the closure of smaller
                  outlets.


**Net
      Sales
      and Operating Revenues**





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


Three
                Months
                Ended March 31,(In
                  millions)
            
            2007
            
            2006
            
            2005RadioShack
                company-operated stores
            
            $
            848.4
            
            $
            996.1
            
            $
            1,013.4Kiosks
            
            
            77.3
            
            
            78.1
            
            
            47.4Other
                sales
            
            
            66.6
            
            
            85.8
            
            
            62.1Consolidated
                net sales and operating revenues
            
            $
            992.3
            
            $
            1,160.0
            
            $
            1,122.9





Consolidated
      net
      sales decreased 14.5% to $992.3 million for the three months ended March 31,
      2007, from $1,160.0 million in the corresponding prior year period. The decrease
      was primarily the result of a 23% decrease in our wireless platform sales and
      a
      15% decrease in our personal electronics platform sales. This sales decrease
      was
      also impacted by the 481 company-operated stores closed in July 2006.
      Additionally, this consolidated net sales and operating revenues decrease was
      attributable, to a lesser extent, to a 22% decrease in other sales related
      primarily to third-party repair activities. We had a 9.2% decrease in comparable
      store sales primarily attributable to lower sales of wireless and personal
      electronics products.





***RadioShack
      Company-Operated Stores Segment***





Sales
      for the
      RadioShack company-operated store segment decreased $147.7 million or 14.8%,
      including $50.9 million related to the 2006 turnaround plan store closings.
      The
      sales decline for the segment after considering the effect of store closings
      in
      2006 was $96.8 million.





Sales
      in our
      wireless platform (includes wireless handsets and communication devices such
      as
      scanners, GPS and two-way radios) after considering the effect of store closings
      in 2006 decreased 25% for the three months ended March 31, 2007, when compared
      to the corresponding prior year period. This decrease was primarily driven
      by a
      decline in unit sales of wireless handsets. Factors contributing to this sales
      decline included promotional activity during the prior year period not repeated
      in 2007, an unfavorable mix shift to prepaid handsets from postpaid, and a
      sluggish wireless industry environment. This decrease was partially offset
      by
      the sales of various recently-introduced GPS products. Wireless platform sales
      including stores closed in 2006 decreased 28%.





Sales
      in our
      accessory platform (includes accessories for home entertainment products,
      wireless handsets, digital imaging products and computers) after considering
      the
      effect of store closings in 2006 were flat for the three months ended March
      31,
      2007, when compared to the corresponding prior year period. The results included
      increases of music and computer accessories sales, offset by a decline in sales
      of both home entertainment accessories and iGo power adapters. Accessory
      platform sales including stores closed in 2006 decreased 6%.





Sales
      in our modern
      home platform (includes residential telephones, home audio and video
      end-products, direct-to-home (“DTH”) satellite systems, and computers) after
      considering the effect of store closings in 2006 increased 4% for the three
      months ended March 31, 2007, when compared to the corresponding prior year
      period. This increase was the result of increased sales of flat panel
      televisions, flash and external hard drives, and DVD players, partially offset
      by a decline in telephone sales. Modern home platform sales including the stores
      closed in 2006 decreased 1%.





Sales
      in our
      personal electronics platform (includes digital cameras, camcorders, toys,
      wellness products, digital music players and satellite radios) after considering
      the effect of store closings in 2006 decreased 9% for the three months ended
      March 31, 2007, compared to the corresponding prior year period. This sales
      decrease was driven primarily by decreased sales of satellite radios and toys,
      but was partially offset by an increase in sales of




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digital
      cameras and
      digital music players. Personal electronics platform sales including the stores
      closed in 2006 decreased 13%.





Sales
      in our power
      platform (includes general and special purpose batteries and battery chargers)
      after considering the effect of store closings in 2006 increased 1% for the
      three months ended March 31, 2007, when compared to the corresponding prior
      year
      period. The sales increase was due to increased sales of special purpose lithium
      batteries, partially offset by a decline in sales of general purpose batteries.
      Power platform sales including the stores closed in 2006 decreased
      6%.





Sales
      in our
      technical platform (includes wire and cable, connectivity products, components
      and tools, as well as hobby and robotic products) after considering the effect
      of store closings in 2006 decreased 3% for the three months ended March 31,
      2007, when compared to the corresponding prior year period. The sales decrease
      was due primarily to a decrease in sales of tools and robotic kits. Technical
      platform sales including the stores closed in 2006 decreased 10%.





Sales
      in our
      service platform (includes prepaid wireless airtime, bill payment revenue and
      extended service plans) after considering the effect of store closings in 2006
      increased 4% for the three months ended March 31, 2007, when compared to the
      corresponding prior year period. This increase was due primarily to increased
      sales of prepaid wireless airtime and extended service plans, but was partially
      offset by a decrease in bill payment revenue. Service platform sales including
      the stores closed in 2006 decreased 2%.





***Kiosks
      Segment***





Kiosk
      sales consist
      primarily of postpaid and repaid wireless sales and related wireless accessory
      sales. Kiosk sales decreased $0.8 million or 1.0% for the three months ended
      March 31, 2007, when compared to the corresponding prior year period. This
      decrease was the result of fewer kiosk locations compared to the first quarter
      of 2006.





***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 to commercial customers, outside sales of our
      global sourcing operations and manufacturing facilities, and, in 2006, sales
      of
      our now closed Canadian company-operated stores. Other sales were down $19.2
      million for the three months ended March 31, 2007, or a decrease of 22.4%,
      when
      compared to the corresponding prior year period. This sales decrease was
      primarily due to a decline in service center revenue resulting from the sale
      or
      closure of five service centers in the second quarter of 2006.





**Gross
      Profit**





Consolidated
      gross
      profit for the three months ended March 31, 2007, was $516.4 million or 52.0%
      of
      net sales and operating revenues, compared with $560.6 million or 48.3% of
      net
      sales and operating revenues in the corresponding prior year period, resulting
      in a 7.9% decrease in gross profit, but a 3.7 percentage point increase in
      our
      gross margin. The decrease in gross profit was primarily the result of a decline
      in net sales and operating revenues. Our first quarter gross margin improved
      due
      to a mix shift toward higher gross margin products and better end-of-life
      management of our inventory. In addition, a $14.0 million refund of federal
      telecommunications excise taxes favorably increased our gross margin by 1.4
      percentage points. See Note 8 - “Federal Excise Tax” for a discussion of the
      impact of the federal telecommunications excise tax.





**Selling,
      General and Administrative Expense**





Our
      consolidated
      SG&A expense decreased 16.9% or $83.7 million for the three months ended
      March 31, 2007, when compared to the corresponding prior year period. This
      represents a 1.2 percentage point decrease to 41.5% from 42.7% of net sales
      and
      operating revenues for the corresponding prior year period.





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 Table
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Compensation
      expense decreased in both dollars and as a percent of net sales and operating
      revenues for the three months ended March 31, 2007. Decreases were driven by
      a
      decrease in our corporate support staff, a reduction of store personnel from
      store closures in 2006, and better management of store labor hours. This
      decrease was partially offset by charges of $8.5 million, representing a
      reduction in corporate support staff of approximately 280 of which the majority
      consisted of compensation charges. Professional fees decreased in both dollars
      and as a percent of net sales and operating revenues for the three months ended
      March 31, 2007. The professional fee decrease was driven by a reduction in
      legal
      fees relating to the 2006 defense costs for certain class action lawsuits,
      as
      well as the reduction in the use of consultants. Advertising expense decreased
      both in dollars and as a percent of net sales and operating revenues for the
      three months ended March 31, 2007, primarily due to a change in our mix of
      media
      from television to more radio and print usage, as well as a reduction in our
      sponsorship programs.





**Depreciation
      and Amortization**





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





Three
                Months
                Ended March 31,(In
                millions)
            
            2007
            
            2006(1)
            
            2005(1)RadioShack
                company-operated stores
            
            $
            13.5
            
            $
            14.2
            
            $
            12.5Kiosks
            
            
            1.6
            
            
            2.7
            
            
            2.3Other
            
            
            0.5
            
            
            0.6
            
            
            0.6Unallocated
            
            
            13.6
            
            
            14.5
            
            
            14.1Consolidated
                depreciation and amortization
            
            $
            29.2
            
            $
            32.0
            
            $
            29.5




(1)
              Amounts
                  have
                  been retrospectively adjusted to conform to current year presentations.
                  Certain prior yearinter
                  company
                  amounts have been reallocated between the segments and
                  Unallocated.




**Impairment
      of Long-lived Assets**





In
      March 2007, we recorded a $0.6 million impairment of long-lived assets relating
      primarily to our company-operated stores. We recorded this amount based on
      the
      remaining estimated future cash flows of the 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. As of
      March 31, 2006, we had identified 481 specific stores for closure, thus
      indicating that the carrying amount of some of the identified stores’ long-lived
      assets would not be recoverable. 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 an $8.9 million
      impairment loss for the three months ended March 31, 2006.





**Net
      Interest Expense**





Consolidated
      interest expense, net of interest income, for the three months ended March
      31,
      2007, was $4.1 million versus $9.8 million for the first three months in
      2006.





Interest
      expense
      was flat for the three months ended March 31, 2007, when compared to the
      corresponding prior year period.





Interest
      income
      increased $5.7 million for the three months ended March 31, 2007, compared
      to
      the corresponding prior year period, due to the higher average investment
      balances. Additionally, we recorded $1.4 million in interest related to the
      federal telecommunications excise tax refund.





Interest
      expense,
      net of interest income, in 2007 is expected to decrease as a result of higher
      average investment balances when compared to last year, as well as our
      anticipated payment of $150 million of our 10-year unsecured long-term notes
      on
      September 1, 2007. See “Long-Term Notes” below.





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**Other
      Loss**





For
      the three
      months ended March 31, 2007 and 2006, we recognized an unrealized loss of $1.0
      million and $0.6 million, respectively, relating to our derivative exposure
      to
      Sirius Satellite Radio Inc. (“Sirius”) warrants, as a result of our mark to
      market of these warrants.





**Income
      Tax
      Provision**





The
      income tax
      provision for each quarterly period reflects our current estimate of the
      effective tax rate for the full year. Our effective tax rates for the quarters
      ended March 31, 2007 and 2006, were 38.8% and 38.2%, respectively.





**Recently
      Issued Accounting Pronouncements**





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 157, "Fair Value
      Measurements" ("SFAS 157"). SFAS 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
      to 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
      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
      February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits
      entities to choose to measure certain financial instruments and other eligible
      items at fair value when the items are not otherwise currently required to
      be
      measured at fair value. Under SFAS 159, the decision to measure items at fair
      value is made at specified election dates on an irrevocable
      instrument-by-instrument basis. Entities electing the fair value option would
      be
      required to recognize changes in fair value in earnings and to expense upfront
      cost and fees associated with the item for which the fair value option is
      elected. Entities electing the fair value option are required to distinguish,
      on
      the face of the statement of financial position, the fair value of assets and
      liabilities for which the fair value option has been elected and similar assets
      and liabilities measured using another measurement attribute. If elected, SFAS
      159 will be effective as of the beginning of the first fiscal year that begins
      after November 15, 2007, with earlier adoption permitted if all of the
      requirements of SFAS 157 are adopted. The impact of the adoption of SFAS 159
      will be dependent on the extent to which we choose to elect to measure eligible
      items at fair value.





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 more likely than not will be sustained on an 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. Any transition adjustment
      recognized on the date of adoption will be recorded as an adjustment to retained
      earnings as of the beginning of the adoption period. We adopted FIN 48 on
      January 1, 2007. See Note 7 - “Income Taxes” for a discussion of the impact of
      FIN 48.




16
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**CASH
      FLOW
      AND LIQUIDITY**





**Cash
      Flow -
      Operating Activities**





Cash
      provided by
      operating activities for the three months ended March 31, 2007, was $47.8
      million, compared to cash usage of $282.6 million for the corresponding prior
      year period. Cash provided by net income plus non-cash adjustments to net income
      was $74.2 million and $53.4 million for the three months ended March 31, 2007
      and 2006, respectively. This increase was due primarily to an increase in
      operating profits in 2007, compared to the prior year. Cash used in working
      capital components was $26.4 million and $336.0 million for the three months
      ended March 31, 2007 and 2006, respectively. This decrease in cash used in
      working capital components was primarily the result of changes in accounts
      payable and inventory, as a result of improved inventory
      management.





**Cash
      Flow -
      Investing Activities**





Cash
      used in
      investing activities was $9.7 million for the three months ended March 31,
      2007,
      compared to $26.6 million for the corresponding prior year period. Capital
      expenditures for these periods related primarily to retail stores and
      information systems projects. We anticipate that our capital expenditure
      requirements for 2007 will range from $60 million to $80 million. RadioShack
      company-operated store remodels and relocations, as well as updated information
      systems, will account for the majority of our anticipated 2007 capital
      expenditures. As of March 31, 2007, we had $463.2 million in cash and cash
      equivalents. These cash and cash equivalents, along with cash generated from
      our
      net sales and operating revenues and, when necessary, from our credit
      facilities, are available to fund future capital expenditure needs.





**Cash
      Flow -
      Financing Activities**





Cash
      used in
      financing activities was $46.9 million for the three months ended March 31,
      2007, compared to cash provided of $130.6 million for the corresponding prior
      year period. We used cash of $45.2 million to repurchase our common stock during
      the three months ended March 31, 2007, while no shares were repurchased in
      the
      corresponding prior year period. The 2007 stock repurchases were partially
      funded by $19.9 million received from stock option exercises. The balance of
      capital to repurchase shares was obtained from cash generated from operations.
      Additionally, our net borrowings decreased $21.6 million for the three months
      ended March 31, 2007, compared to a net increase of $123.0 million during the
      corresponding prior year period. The decrease in 2007 primarily relates to
      outstanding checks in excess of cash balances.





**Free
      Cash
      Flow**





Our
      free cash flow,
      defined as cash flows from operating activities less dividends paid and
      additions to property, plant and equipment, provided $37.1 million for
      the three
      months ended March 31, 2007,
      compared to a
      $309.8 million usage during the corresponding prior year period. This increase
      in free cash flow was the result of an increase in cash provided by working
      capital components, primarily accounts payable and inventory and, to a lesser
      extent, an increase 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 that management
      believes will enhance shareholder value. The comparable financial measure to
      free cash flow under generally accepted accounting principles is cash flows
      from
      operating activities, which provided $47.8 million for the three months ended
      March 31, 2007, compared to a cash usage of $282.6 million for the corresponding
      prior year period. 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.




17
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The
      following table
      is a reconciliation of cash provided by operating activities to free cash
      flow:





Three
                Months
                Ended March 31,
            
            Year
                Ended
              December
                31,(In
                millions)
            
            2007
            
            2006
            
            2006Net
                cash
                provided by (used in) operating activities
            
            $
            47.8
            
            $
            (282.6
            )
            $
            314.8Less:Additions
                to
                property, plant and equipment
            
            
            10.7
            
            
            27.2
            
            
            91.0Dividends
                paid
            
            
            --
            
            
            --
            
            
            33.9Free
                cash
                flow
            
            $
            37.1
            
            $
            (309.8
            )
            $
            189.9





**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 April 20, 2007.


Category
              
              Standard
                  and
                  Poor’s
              
              Moody's
              
              FitchSenior
                  unsecured debt
              
              BB
              
              Ba1
              
              BB+Outlook
              
              Negative
              
              Stable
              
              NegativeCommercial
                  paper
              
              B-1
              
              NP
              
              B




On
      March 12, 2007, Moody’s changed its long-term rating to Ba1, long-term outlook
      to stable and short-term rating to NP. These actions followed the announcement
      of our calendar 2006 earnings. Factors that could impact our future credit
      ratings include free cash flow and cash levels, changes in our operating
      performance, the adoption of a more aggressive financial strategy, 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 debt capital markets, vendor financing terms and future new
      store occupancy costs.





**Long-Term
      Notes**





We
      have a $300.0 million debt shelf registration statement which became effective
      in August 1997. In August 1997, we issued $150.0 million of 10-year unsecured
      long-term notes under this shelf registration. The interest rate on the notes
      is
      6.95% per annum with interest payable on September 1 and March 1 of each year.
      These notes contain certain non-financial covenants and are due September 1,
      2007. We anticipate paying these obligations from cash generated during the
      year
      and existing cash balances.





**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. After consultation between management and the Finance
      and
      Strategic Transactions Committee of the board, w e
      repurchased 1.8
      million shares or $46.5 million of our common stock during the three months
      ended March 31, 2007 .
      We used cash of
      $45.2 million to repurchase this stock, with the difference to be paid in April
      2007. As
      of March 31,
      2007, there was $163.4 million available for share repurchases under the $250
      million share repurchase program.




18
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**Capitalization**





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





March
                31,
            
            December
                31,2007
            
            2006
            
            2006($
                in
                millions)
            
            Dollars
            
            %
                of Total
                Capitalization
            
            Dollars
            
            %
                of Total
                Capitalization
            
            Dollars
            
            %
                of Total
                CapitalizationCurrent
                debt
            
            $
            178.5
            
            
            14.7
            %
            $
            163.7
            
            
            12.9
            %
            $
            194.9
            
            
            16.3
            %Long-term
                debt
            
            
            342.0
            
            
            28.0
            %
            
            491.9
            
            
            38.9
            %
            
            345.8
            
            
            29.0
            %Total
                debt
            
            
            520.5
            
            
            42.7
            %
            
            655.6
            
            
            51.8
            %
            
            540.7
            
            
            45.3
            %Stockholders’
                equity
            
            
            699.5
            
            
            57.3
            %
            
            611.1
            
            
            48.2
            %
            
            653.8
            
            
            54.7
            %Total
                capitalization
            
            $
            1,220.0
            
            
            100.0
            %
            $
            1,266.7
            
            
            100.0
            %
            $
            1,194.5
            
            
            100.0
            %





Our
      debt-to-total
      capitalization ratio decreased at December 31, 2006, and March 31, 2007, from
      March 31, 2006, due primarily to a decrease in debt from March 31, 2006.
      Long-term debt as a percentage of total capitalization also decreased from
      March
      31, 2006, due primarily to the reclassification of $150 million of long-term
      debt as short-term debt.





**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 arising from leases 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 March 31, 2007, assuming no projected
      sublease income, is approximately $110 million. On February 27, 2007, CompUSA
      announced the closure of approximately 126 of its stores as part of a nationwide
      realignment of its operations, some of which are stores for which we have
      guaranteed the leases. We are continuing to monitor this situation; however,
      at
      this time we do not believe there will be a material impact on our financial
      statements from any fulfillment of these contingencies.





**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 Annual Report on Form 10-K for the year ended
      December 31, 2006. 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
      March 31, 2007, 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 interest rate swaps, as well as
      warrants we earned to acquire common stock of Sirius Satellite Radio Inc.
      (“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 investment position at March 31, 2007,
      of $161 .3 million,
      consisting of fluctuating short-term investments, which are classified as
      interest bearing cash and cash equivalents on the balance sheet, of $421.8
      million and offset by $260.5 million of indebtedness which, because of our
      interest rate swaps, effectively bears




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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 a decrease in annual net interest
        expense of $1.6 million. This hypothesis 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, 2006 and 2005, to purchase 2 million and 4 million shares,
      respectively, of Sirius stock at an exercise price of $5.00 per share. We have
      recorded these as assets using a Black-Scholes-Merton valuation method. Our
      maximum exposure is equal to the carrying value at March 31, 2007, of $0.4
      million.





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 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
      and certain of our former and current directors and officers are currently
      parties to two putative class action lawsuits, styled *Damore
      v.
      RadioShack et al* .
      and *Hawana
      v.
      RadioShack et al* .,
      which were filed
      in the United States District Court for the Northern District of Texas, Fort
      Worth Division, on March 16, 2007, and March 27, 2007, respectively. These
      actions purport to be brought on behalf of all persons who purchased
      RadioShack’s common stock between January 14, 2003, and June 7, 2006. The
      complaints allege, among other things, that we failed to disclose material
      adverse facts about our financial well-being, business relationships and
      prospects. The complaints seek, among other things, a declaration that the
      actions are a proper class action, as well as awards for damages and interest,
      reasonable costs and expenses (including attorneys’ and experts’ fees). We
      believe the alleged causes of action are without merit and intend to vigorously
      defend against these cases.





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, which we recorded in
      the
      second and third quarters of 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




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 Table
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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
      1A.
      RISK FACTORS.**





Our
      Annual Report
      on Form 10-K for the year ended December 31, 2006, includes a detailed
      discussion of our risk factors. The risks described in our Form 10-K 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)January
                1 -
                31, 2007
            
            
            ---
            
            $
            ---
            
            
            ---
            
            $
            209,909,275February
                1 -
                28, 2007
            
            
            ---
            
            $
            ---
            
            
            ---
            
            $
            209,909,275March
                1 - 31,
                2007
            
            
            1,837,300
            
            $
            25.34
            
            
            1,837,300
            
            $
            163,350,338Total
            
            
            1,837,300
            
            $
            25.34
            
            
            1,837,300




(1)
              The
                  total
                  number of shares purchased includes all repurchases made during
                  the
                  periods indicated. InJanuary,
                  February and March of 2007, no shares were repurchased other than
                  through
                  a publicly announcedplan
                  or
                  program in open-market transactions.(2)
              These
                  publicly announced plans or programs consist of RadioShack’s $250 million
                  share repurchaseprogram,
                  which was announced on March 16, 2005, and has no expiration date.
                  On
                  August 5, 2005, wesuspended
                  purchases under the $250 million share repurchase program during
                  the
                  period in which a financialinstitution
                  purchased shares pursuant to an overnight share repurchase program.
                  During
                  March 2007,
                management
                  resumed share repurchases under the $250 million program.During
                  the
                  period covered by thistable,
                  no
                  publicly announced plan or program expired or was terminated, and
                  no
                  determination was made byRadioShack
                  to
                  suspend or cancel purchases under our program. As of March 31,
                  2007, there
                  was $163.4million
                  available for share repurchases under the $250 million share repurchase
                  program.





**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 23, which immediately
      precedes such exhibits.


21
 Table
          of Contents


**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:
                  April
                  30, 2007
              By
              /s/
              David
                  P.
                  JohnsonDavid
                  P.
                  JohnsonSenior
                  Vice
                  President - Chief AccountingOfficer
                  and
                  Corporate Controller(Authorized
                  Officer)Date:
                  April
                  30, 2007
              
              /s/
              James
                  F.
                  GoochJames
                  F.
                  GoochExecutive
                  Vice President -Chief
                  Financial Officer(Principal
                  Financial Officer)


22
 Table
          of Contents


**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
              Description
                  of 2007 Annual Incentive Bonus Performance Measures for Executive
                  Officers(filed
                  as
                  Exhibit 10.1 to RadioShack’s Form 8-K filed on February 28, 2007, and
                  incorporated herein by reference).10.2
              Description
                  of Long-Term Incentive Performance Measures for Executive Officers
                  for the
                  2007 through 2008 Performance Cycle(filed
                  as
                  Exhibit 10.2 to RadioShack’s Form 8-K filed on February 28, 2007, and
                  incorporated herein by reference).10.3*
              Second
                  Amended and Restated RadioShack 2004 Deferred Stock Unit Plan for
                  Non-Employee Directors.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.





23