Richard Damore, Et Al. V. Radioshack Corporation, Et Al. Damore-Class

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C^1 O RI G I NAL UNITED STATES DISTRICT COURT 16 IN11 11 13 NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION

RICHARD DAMORE, on Behalf of Himself § Civil Action No. and All Others Similarly Situated, § 17 9 Plaintiff, §

vs. §

RADIOSHACK CORPORATION, § LEONARD H. ROBERTS, EVELYN V. § FOLLIT, DAVID P. JOHNSON, DAVID J. § EDMONDSON, MICHAEL D. NEWMAN, § CLAIRE H. BABROWSKI, DAVID G. § BARNES and RONALD E. ELMQUIST, §

Defendants. § § DEMAND FOR JURY TRIAL

CLASS ACTION COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS

INTRODUCTION

1. This is a securities class action on behalf of all persons who purchased or

otherwise acquired the common stock of RadioShack Corporation ("RadioShack" or the

"Company") between January 14, 2003 and June 7, 2006 (the "Class Period") for violations of

§ § 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule I Ob-5

promulgated thereunder by the Securities and Exchange Commission ("SEC"). The defendants

are RadioShack and its top officers and directors.

JURISDICTION AND VENUE

2. Jurisdiction exists pursuant to §27 of the Exchange Act [15 U.S.C. § 78aa] and 28

U.S.C. §1331. The claims asserted arise under § § 10(b) and 20(a) of the Exchange Act [15

U.S.C. §§78j(b) and 78t(a)] and Rule lOb-5. -1- a T

3. Venue is proper in this district pursuant to §27 of the Exchange Act [15 U.S.C.

§78aa] and 28 U.S.C. § 1391(b). Many of the acts giving rise to the violations complained of

occurred in this district. RadioShack is headquartered in Fort Worth, Texas.

4. Defendants used the instrumentalities of interstate commerce, the U.S. mail and

the facilities of the national securities markets.

THE PARTIES

5. As detailed in the attached certification, plaintiff Richard Damore purchased or

otherwise acquired RadioShack common stock at artificially inflated prices during the Class

Period and suffered damages when RadioShack's stock fell as the truth was revealed to the

market.

6. Defendant RadioShack was incorporated in Delaware in 1967. The Company

primarily engages in the retail sale of consumer electronics goods and services through

RadioShack store chain and non-RadioShack branded kiosk operations. At December 31, 2006,

the Company operated 4,467 company-owned stores under the RadioShack brand, located

throughout the United States, as well as in Puerto Rico, and the U.S. Virgin Islands. At

December 31, 2005, the Company operated 777 kiosks located throughout the United'States.

These kiosks are primarily inside SAM'S CLUB locations , as well as stand-alone Sprint Nextel

kiosks in major shopping malls. These locations, which are not RadioShack-branded, offer

product lines including wireless handsets and associated accessories, as well as DTH satellite

systems. The Company also provides consumers access to third-party wireless telephone

services. The Company may be served at 300 RadioShack Circle, Fort Worth, Texas 76102.

7. Defendant Leonard H. Roberts ("Roberts") was Chairman of the Board of

Directors of RadioShack from May 1999 until his term as a director expired on May 18, 2006,

and Chief Executive Officer from January 1999 until May 19, 2005, when he retired as Chief

-2- Executive Officer. Previously, Roberts was President of RadioShack from December 1995 to

December 2000. During the Class Period, Roberts sold 375,000 shares of his RadioShack stock

for illegal insider trading proceeds of $11,372,050. Defendant Roberts may be served at 4400

Overton Crest Street, Fort Worth, Texas 76109.

8. Defendant Evelyn V. Follit ("Follit") served as Vice President and Chief

Information Officer from July 1998 to May 1999, when she was appointed Senior Vice President

and Chief Information Officer. In March 2003, she was appointed Senior Vice President -

Organizational Enabling Services and Chief Information Officer and, in October 2003, she was

appointed Senior Vice President - Chief Organizational Enabling Services Officer and Chief

Information Officer. Effective February 28, 2005, Follit retired from RadioShack. During the

Class Period, Follit sold 46,544 shares of her RadioShack stock for illegal insider trading

proceeds of $1,439,590. Defendant Follit may be served at 2031 Harbour Watch Circle, Tarpon

Springs, Florida 34689.

9. Defendant David P. Johnson ("Johnson") has served as Senior Vice President-

Corporate Controller of RadioShack since May 2006. Previously Johnson served as Senior Vice

President-Chief Accounting Officer from April 2005 to May 2006 and as Senior Vice President

and Controller of Radio Shack from May 2002 to April 2005. Additionally, Johnson served as

Acting Chief Financial Officer from July 2004 through April 2005. Defendant Johnson may be

served at 112 Tree Lane, Tavernier, Florida 33070.

10. Defendant David J. Edmondson ("Edmondson") served as Senior Vice President

of RadioShack and Executive Vice President and Chief Operating Officer of the RadioShack

division from October 1998 to December 2000. Edmondson served as President and Chief

Operating Officer of RadioShack from December 2000 to May 19, 2005, when he was appointed

Chief Executive Officer of RadioShack. He received a bonus of $817,386 in 2003 and a bonus

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, of $820,219 in 2004. He resigned on February 26, 2006, after the media identified false

information on his resume. Defendant Edmondson may be served at 1306 Plantation Drive,

Southlake, Texas 76092.

11. Defendant Michael D . Newman ("Newman") served as Senior Vice President and

Chief Financial Officer of RadioShack from May 2001 until he resigned in July 2004. During

the Class Period, Newman sold 128,333 shares of RadioShack stock for insider trading proceeds

of $4,153,050. Defendant Newman may be served at 1308 Regency Court, Southlake, Texas

76092.

12. Defendant Claire H. Babrowski ("Babrowski") served as President and Acting

Chief Executive Officer from February 2006 until her resignation from the Company in August

2006. She served as Executive Vice President and Chief Operating Officer from July 2005 to

February 2006. Defendant Babrowski may be served at 1505 Rivercrest Court, Fort Worth,

Texas 76107.

13. Defendant David G. Barnes ("Barnes") was appointed Executive Vice President

in March 2006. He served as Chief Financial Officer since April 2005. Barnes served as Senior

Vice President from April 2005 to March 2006. Barnes resigned from the Company in July

2006. Defendant Barnes may be served at 165 Barcelona Drive, Boulder, Colorado 80303.

14. Defendant Ronald E. Elmquist ("Elmquist") was a director of RadioShack from

1997 until he resigned from the Board on November 2, 2006. During the Class Period, Elmquist

sold 20,000 shares of RadioShack stock for insider trading proceeds of $680,665. Defendant

Elmquist may be served at 4300 Belclaire Avenue, Highland Park, Texas 75205.

15. The individuals named in ¶¶7-14 are referred to herein as the "Individual

Defendants." Because of their positions and access to material non-public information available

to them but not to the public, the Individual Defendants knew that the adverse facts specified

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herein had not been disclosed to and were being concealed from the public and that the positive

representations which were being made were then materially false and misleading. The

Individual Defendants, by reason of their stock ownership or positions with RadioShack or

representation on RadioShack's Board, were controlling persons of RadioShack. These

controlling persons are each liable under §20(a) of the Exchange Act.

16. The Individual Defendants, because of their positions with the Company,

possessed the power and authority to control the contents of RadioShack's quarterly reports,

press releases and presentations to securities analysts, money and portfolio managers and

institutional investors, i.e., the market. The Individual Defendants were provided with copies of

the Company' s reports and press releases alleged herein to be misleading prior to or shortly after

their issuance and had the ability and opportunity to prevent their issuance or cause them to be

corrected.

DEFENDANTS' FALSE AND MISLEADING STATEMENTS

17. On January 14, 2003, RadioShack issued a press release entitled "RadioShack

Corporation Concludes Investor Conference," which stated:

RadioShack Corporation today concluded its two-day institutional investor conference. The conference featured several senior management presentations. The more salient points of the conference were as follows:

Financial

- RadioShack expects 13% - 15% annual earnings per share (EPS) growth from 2003 to 2005. The company's expectation is based on sales growth of 2% to 3%, gross margin improvement of 70 to 80 basis points, SG&A growth of 1 % to 2%, and a share repurchase program of $200 million to $250 million.

- Assumed in the EPS growth is about $0.11 per share worth of benefit from the company's vendor and price initiatives. Those initiatives include (but are not limited to) centralizing product procurement, driving vendor costs lower, implementing sophisticated pricing software, and improving the company's markdown processes.

- RadioShack further detailed its 2003 sales projections by outlining its anticipated sales growth by department. Among those projections: -5- - Wireless, 3% to 4%. The company anticipates a healthy, yet less robust wireless environment than 2002.

- Computer, 10% to 12%. RadioShack anticipates continuing favorable results due to its shift in emphasis towards networking, digital imaging, and portable computing versus desktop computers and monitors.

- Home entertainment, 0% to 2%. The company anticipates gains in home entertainment accessories and home video offset by declines in direct-to-home satellite

- RadioShack discussed estimated 2003-2005 sales growth rates in selected merchandise categories among different departments. These categories were highlighted because of their importance to the RadioShack strategy of servicing customers' routine electronic needs.

- Computer accessories, strong double-digit percentage growth,

Home entertainment accessories , mid-single-digit percentage growth,

- Wireless accessories, 10% growth, and

- Batteries, high-single-digit percentage growth. This will be executed through better in-store space allocation, improved assortment, associate training, and aligned compensation.

- RadioShack has formed an internal cost team that is targeting ways to bring the company's SG&A expenses as a percent of sales to 33% - 34% by 2005.

- At 21 %, RadioShack Corporation has a superior return on invested capital versus the S&P 500, S&P Retail, and S&P Specialty Retail indexes. RadioShack's store base has improved its ROIC by 100 basis points, based on the most recent 2002 data. The company has reduced the number of its stores with an ROIC of less than 10% to approximately 178 stores, down 71 from the middle of last year.

- The company's free cash flow projections are now expected to be $215 million in 2003 and $235 million in 2004.

Merchandising & Advertising

- Radio Shack is strengthening its merchandising model by competing in selective product categories, shifting its focus toward specific family target audiences, upgrading the skills of its merchandising organization, planning its merchandising seasonally instead of annually, focusing on being right-priced, and executing its strategy of servicing everyone's routine electronics needs and families' unique electronics wants. -6- - RadioShack intends to drive sales and profitability in its accessory business through product and brand innovation, depth of stock, and improved organizational focus (e.g. management reporting systems, compensation plans, speed to market).

Leading product categories that are expected to drive financial results in 2003 include accessories, wireless handsets and services, specialty batteries, digital photography, personal electronics, and portable computing.

- The company will extend its new store environment test (going on now in Tucson and Jacksonville) to 227 more stores in 2003. Nicknamed "Best to Shop," the more contemporary looking stores have seen favorable sales trends recently.

18. On January 14, 2003, in response to these positive statements, RadioShack stock climbed from $20.91 to $21.93, an increase of 4.8%. The next day RadioShack stock climbed from $21.93 to $22.41, an increase of 2.1%.

19. On February 20, 2003, RadioShack issued a press release entitled "RadioShack

Corporation Announces Fourth Quarter 2002 Net Income of $109 Million," which stated:

RadioShack Corporation today announced fourth quarter net income of $109.1 million or $0.63 per diluted share for the quarter ended December 31, 2002, compared to net income of $35.2 million or $0.18 per diluted share for the quarter ended December 31, 2001. The company also reported fourth quarter financial results on an adjusted basis in 2002 and in 2001. On an adjusted basis, RadioShack reported fourth quarter 2002 net income of $102.1 million or $0.59 per diluted share, compared to net income of $125.7 million or $0.67 per diluted share in the prior year.

Comparable store sales for the fourth quarter 2002 were up 2% compared to the prior year. Total sales in fourth quarter 2002 were $1,498 million, compared to total sales of $1,516 million the previous year, a decline of 1 %.

"RadioShack's fourth quarter earnings are the result of respectable same store sales in a challenging retail environment," said Leonard Roberts, chairman and chief executive officer of RadioShack Corporation. "The company also generated $375 million of free cash flow for the full year, exceeding its free cash flow guidance."

For the fiscal year-end 2002, RadioShack produced net income of $263.4 million or $1.45 per diluted share. This compares to fiscal year-end 2001 net income of $166.7 million or $0.85 per diluted share. Adjusted for unusual items,

-7- 2002 net income was $257.8 million or $1.42 per diluted share versus 2001 net income of $292 million or $1.51 per diluted share.

Comparable store sales for the fiscal year-end 2002 were down 1% compared to the previous year. Total sales in 2002 were $4,577 million, compared to total sales of $4;776 million the previous year, a decline of 4%.

Financial Guidance

- For first quarter 2003, RadioShack announces it is comfortable with the consensus earnings per diluted share estimate of $0.33. First quarter 2002 earnings per diluted share were $0.31. RadioShack anticipates full year 2003 earnings per share to be at least $1.60, representing a 13% increase over its full year adjusted 2002 earnings per share. The $1.60 is based upon the following assumptions:

- Sales growth of 2% to 3%,

- Gross margin improvement of 70 to 80 basis points,

- SG&A growth of 1% to 2%, and

- Share buybacks of $200 million to $250 million.

. .. _20... _ On a conference .call-with analysts on the same day, defendant Newman, the CFO,

stated:

In the area of inventory, we ended the year with $971 million of inventory versus $950 million a year before. We were $21 million user of free cash in 2002 as it relates to inventory.

This performance did not meet our expectations of a 25 to $50 million reduction in inventory for 2002 principally due to the fact that our sales fell below our plan in the fourth quarter. While we are disappointed, we did not bring our inventory level down year-over-year, our markdown processes this year are better than they were a year ago.

Consequently, I believe the future is more promising in the area of inventory management and as I stated last month at our conference, I believe there is an opportunity for inventory reduction of up to $100 million both at the store level and the DC level. With better tools to start 2003 versus 2002 I believe we can seize upon some of that opportunity in the coming months.

21. On the same call, defendant Roberts, Chairman and CEO, told the analysts:

When I was last before you folks in the investment community at our institutional investor conference in January, I spoke about our solutions oriented strategy. That is to dominate cost-effective solutions to meet everyone's routine electronic

-8- needs and families' distinct electronic wants. Well today I thought I'd share with you a few new examples of what we're up to these days to execute that strategy.

Now, some of the activities are coming up later this year. Some are being newly deployed right now and some of the following examples are activities we have been -doing for a number of quarters now but you may not have been aware of them or their existence or importance.

Three, as Mike briefly mentioned, we're doing a lot more accessory bundling which is a real winning solution for RadioShack and its customers. Accessories bundled with end products are easy for our associates to understand and sell. They are very favorable from a financial perspective, their value is easy for customers to understand. And accessories bundled with end products provide customers with a needed service to optimize performance of their digital devices. The digital devices we are or will be bundling accessories to include digital cameras, wireless handsets and computers.

Four, part of the reason we had a successful year in wireless communications is because of the additional services we provide that other retailers do not. For instance, we process deposits, we activate handsets, and we even accept PCS bill payments in our stores. These are services we provide which means RadioShack can satisfy customers and not have to send them to carrier stores like other retailers.

Our strong focus on the wireless customer has truly paid off for us over the years and I believe you will see this payoff again in the first quarter in 2003 and for the rest of this year and beyond. Sticking with wireless for a moment, our success in 2002, which Mike discussed, and our favorable results quarter to date are a direct result of the solutions our people provide.

You see, you must understand that despite wireless penetration projections in the U.S. of over 50%, still over 9 million wireless customers chum their handsets every quarter and many are now coming to RadioShack looking for a better solution than they have now. Verizon and Sprint PCS are recognizing more and more of the RadioShack's strength in this high chum environment. Being aligned with two of the most reliable networks in the United States should also not be underestimated.

22. On the same call, Danielle Fox, an analyst at J.P. Morgan, asked:

Could you just walk us through the key elements of the supply chain strategy that you expect to drive the 70 to 80 basis points of gross margin expansion, maybe to your top two or three initiatives, just give us an update on where you are on each of them?

Roberts responded:

-9- - Yeah, let me take that. First of all, I think that product development and bringing new innovative products to market is a very important part of what we're focused on. Relevant to the speed to which we bring things to market, we really used ZipZap and Environizer as two tests outside of our current system so they were pilots for a new way of doing things. We brought those products to market very quickly. In terms of the way we got them here to the U.S., we modified that without getting into a lot of details which gave us the ability actually to sell the product before we paid for it. Which is a good thing. We put ourselves - so that's first one is around the whole product development.

Second is distribution logistics and replenishment. And increasing the rate at which things are shipped. For example, number of ships that come out of Asia today are on average three a month. And we'll move toward more daily shipping. Now, what that does is that allows the inventory to flow through the entire system at a more even level. Thereby keeping it - putting it in a position where you don't have to have safety stocks of inventory in certain pockets. So smoothing out that supply chain.

The third issue is related to vendors and how we're working with vendors in terms of negotiating cost of goods. You'll see, for example, in certain categories auctioning, frame agreements, and a number of other tactics that we will use relevant to working with vendors to reduce cost of goods. And those are some of the more relevant ones.

Pricing is probably the other aspect of it that I'll mention. And we have a pricing program which is in place that will allow us to get to more right pricing across the marketplace and. give us a position so that we'll be able to sell through product faster and not have to take the same kind of markdowns. The only the - other area I would today that is in sourcing, is we're talking about both direct and indirect and we have about $700 million or so a year of indirect purchasing and that's a target, as well.

23. In RadioShack' s annual report on Form 10-K filed with the SEC on or about

March 28, 2003, defendants represented:

Management believes we have two primary factors differentiating us from our competition. The first is our extensive physical retail presence with approximately 7,200 conveniently located retail outlets in virtually every neighborhood nationwide. Our specially trained sales staff is capable of providing cost-effective solutions for our customers' routine electronics needs and distinct electronics wants, assisting customers with service activation where applicable, and assisting with the selection of appropriate products and accessories.

Our relationships with well-recognized companies represent our other differentiating factor. These relationships with such companies as Sprint, Verizon, Thomson (RCA) and Compaq, among others, augment the strong position that we have historically maintained in our core product categories such as batteries, communications equipment, telephony, antennas, and parts and accessories. Additionally, we are able to leverage name brand recognition, marketing efforts -10- and advertising campaigns with these vendors and also create cross-revenue opportunities for repair service income, residual income, consumer acquisition fees and rebates.

Inventory: Inventory is our largest asset class. Our inventory is primarily comprised of finished goods and is recorded at the lower of cost or market using the average cost method. We make estimates regarding the carrying value of our inventory on an item-by-item basis. If the amount we expect to receive from the sale of the inventory is less than its cost, we write down the cost of the inventory to its estimated realizable value based on assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, or if unexpected changes in technology affect demand for certain products, we could be exposed to losses in excess of our established reserves.

Sales in the power and technical department increased 0.8% in dollars and also as a percentage of our total retail sales to 13.9% in 2002 from 13.3% in 2001. These increases were primarily due to increased sales of general and special purpose batteries, partially offset by decreased sales of bulk and packaged wire and technical parts. We anticipate a slight sales increase in this department in 2003.

Sales in the personal electronics, toys and personal audio department increased 2.5% in dollars, as well as increasing as a percentage of our total retail sales to 12.8% in 2002 from 12.1% in 2001, due primarily to increased sales of micro radio controlled cars and related accessories, in addition to unique giftables. We expect that sales in this department will continue to grow in 2003 as a result of our additional name brand product offerings and our product line increases in these areas.

We anticipate that gross profit as a percentage of net sales and operating revenues will improve by the end of 2003, when compared to 2002, enhanced by sales mix changes towards higher margin products, such as computer accessories, batteries, toys, and personal audio and electronics, and also enhanced by improved efficiencies realized from supply chain management initiatives, particularly in vendor relations and end-of-life inventory management.

In 2003, we expect SG&A expense to increase slightly in dollars, but decrease slightly as a percentage of net sales and operating revenues due to increased sales volume.

-11- 24. . On or about April 29, 2003, RadioShack distributed its Annual Report to

Shareholders, which stated in part:

When our company entered 2002, we were squarely focused on selling more profitably by leaning into the more profitable portions of our business: wireless, accessories and batteries. We drove higher sales and gross profit in these categories, which made up approximately 55% of our business at year-end. Still, 2002 was a year of poor overall financial results because Radio Shack failed to execute across all its businesses.

Sales were $4.58 billion in 2002, four percent lower than in 2001. Adjusted for unusual items, net income was $258 million or $1.42 per share last year, compared to $292 million or $1.51 per share in 2001. Operating margin was 9.7% in 2002 versus 10.6% the prior year.

The 2002 underperformance can be attributed primarily to two product categories : Direct-to-home satellite television and desktop computers....

While I am extremely disappointed that we failed to deliver on our 2002 financial expectations, I am pleased to report that we succeeded in delivering on the merchandise and store operations areas of opportunity that I outlined for you in last year's letter to shareholders. In that letter I wrote that in 2002 RadioShack would carry more innovative products, offer a greater selection of accessories, and bring high-speed connectivity to our stores to improve customer service. * *_

GREATER SELECTION OF ACCESSORIES

In 2002, RadioShack sold hundreds more accessories and batteries for digital end-products than in 2001....

RadioShack has long been given credit by consumers as a destination for accessories and batteries. In 2002, we fortified that perception by improving our product lineup. We will further build upon this franchise in 2003.

STRATEGY

A better customer shopping experience can only come from having insight about your customers. In 2002, we embarked upon some intensive in-depth customer analysis which (among other things) revealed four important insights about the way the buying public thinks about the customer electronics marketplace and RadioShack. Our strategy, "To dominate cost-effective solutions to meet everyone's routine electronics needs and families' distinct electronics wants," is based upon these four critical consumer insights.

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Customers have many simple electronics needs (accessories, batteries, and other enabling devices) they want fulfilled in a simple, easy manner, where convenience, selection, quality, simplicity, answers, and fair price, matter.

This speaks to the routine, everyday electronics needs that people have, and they trust RadioShack to satisfy them because we have the assets in place to serve them: 30,000 knowledgeable associates, a vast distribution system with 7,200 locations, brand names, and the products and services that will satisfy these needs.

Introducing new and innovative products is a mission-critical element of our strategy. As noted earlier, we became more innovative and more relevant to the consumer with our product offerings in 2002. We will extend this progress into 2003.

THE OUTLOOK

Our focus on . . . families' distinct electronics wants and everyone's routine electronics needs should help solidify RadioShack's already sound business model. We expect annual earnings per share growth to be 13% to 15%. That EPS growth is predicated upon:

• Modest, realistic, and conservative sales growth of 2% to 3%;

• Gross margin improvement of 70 to 80 basis points primarily from supply chain initiatives;

• Selling, general and administrative (SG&A) expense growth of 1% to 2%; and

• Share buybacks of $200 million to $250 million.

Sales from our anchor (or core) departments of wireless, accessories and batteries are expected to grow about 4% to 6%, while other departments are expected to grow approximately 1 %. We will continue to source strong brands of relevant products and be quicker to market and right-priced with them. Our more contemporary, retrofitted store environment which we rolled out to all stores in 2002 will also help drive sales. Early indicators find that the improved product adjacencies and better signage and displays lead to a store environment which is easier for our customers to shop in, and easier for our associates to sell in.

Our projected gross margin rate gain implies RadioShack will reap benefits of the supply chain initiatives deployed late in 2002 and early 2003. We -13- are getting better pricing and terms from vendors in a number of ways: cost reductions, coordinating and leveraging our own ordering better across our merchandising organization; consolidating vendors; plus many more activities. Also under the supply chain banner, we expect to benefit from our price optimization initiatives. We will deploy new DemandTec software and extend a successful 2002 test to many more markets in an effort to become right-priced in everything we sell. Collectively, we expect to see about $40 million to $50 million in gross profit improvement in 2003 from supply chain initiatives.

Our organization demonstrated commendable expense discipline in 2002. Selling, General and Administrative expense (in dollars) was flat versus 2001. I fully expect that this discipline will continue in 2003 in order to hold SG&A expense growth to around 1% to 2%.

RadioShack continues to maintain a sound cash position. We ended 2002 with $447 million in cash and short-term investments on our balance sheet and generated $375 million of free cash flow. We are committed to maintaining ample liquidity and a healthy capital structure that best positions us for long-term growth and as protection against a continued downturn in the economy.

WE GO FORWARD A STRONG, SOUND ENTERPRISE

I'm proud that our RadioShack team made significant progress in building a stronger retail organization during a difficult year.

You have my whole-hearted commitment that I will do everything in my power with the utmost in ethics to return growing profitability to your company for the long term. Together with 37,000 of the most capable team members in retail today, we will execute our strategy and thereby fulfill our vision to be the most powerful one-stop shop to connect people (through products and services) with the wonders of modern technology.

25. In response to these positive statements, RadioShack stock climbed over 2% from

$22.72 to $23.18. The next day, the stock rose another 3.3% to close at $23.95.

26. On April 22, 2003, RadioShack issued a press release entitled "RadioShack

Corporation Announces First Quarter 2003 Net Income of $56.6 Million, $0.33 per Share," which stated:

Radio Shack Corporation today announced first quarter net income of $56.6 million or $0.33 per diluted share for the quarter ended March 31, 2003, compared to net income of $57.6 million or $0.31 per diluted share for the quarter ended March 31, 2002.

-14- Comparable store sales for the first quarter 2003 were up 5% compared to the prior year. Total sales in the first quarter 2003 were up 3% to $1,070 million, compared to total sales of $1,034 million for the previous year. Wireless communications department sales for the first quarter of 2003 were up 14%.

"RadioShack's first quarter financial results were driven by strong sales of highly relevant electronics products and services that today's customers demand and RadioShack is best-positioned to sell," said Leonard Roberts, chairman and chief executive officer of RadioShack Corporation. "Results in wireless, digital photography, and other successful categories were driven by sound execution from our associates and an improved store layout."

First quarter 2003 inventory turnover was 2.6 times versus 2.4 a year ago. Compared to last year, first quarter 2003 inventory was only 1.6% higher despite a 3% sales gain. Free cash flow for the first quarter of 2003 was $82 million.

Financial Guidance

- For the second quarter of 2003, RadioShack anticipates generating diluted earnings per share of $0.27-$0.30.

- For the full year 2003, RadioShack continues to anticipate earnings per share to be at least $1.60, representing a 13% increase over its full year adjusted 2002 earnings per share. The $1.60 is based upon the following assumptions:

- approximately 3.5% to 4.0% growth-in sales and SG&A,

- gross margin improvement of 0 to 20 basis points, and

average year-end shares of 168 million.

27. On May 15, 2003, RadioShack issued a press release entitled "RadioShack

Defines Strategic Differentiation at Annual Shareholders' Meeting: CEO Reiterates Confidence in Solutions Strategy; Continued Emphasis On Corporate Governance," which stated:

RadioShack Corporation held its annual shareholder meeting today in Fort Worth where Chairman and Chief Executive Officer Leonard H. Roberts outlined how the company is differentiating itself from other consumer electronics retailers as well as detailed the company's leadership role in the area of corporate governance. Additionally, shareholders elected 13 members of the board of directors, including three new directors, to serve a one-year term.

"Only RadioShack is uniquely poised to dominate cost-effective solutions to meet everyone's routine electronics needs and families' distinct electronics wants," Roberts said, "Our consumer research shows that solutions mean more than just having an answer to a consumer's particular product or service need or

-15- want. It also means extensive, product selection and quality at a reasonable price. Combine these needs with our knowledgeable sales associates and it is clear that we have a definitive competitive edge that will differentiate RadioShack in the minds of consumers and ensure our relevance both now and in the future."

Roberts continued, "Our solutions strategy is the thread that connects RadioShack's mission of demystifying technology in every neighborhood in America to its vision of becoming the most powerful one-stop shop to connect people - through products and services - to the wonders of modern technology. The physical manifestation of this strategy is our new concept store design we're testing in Tucson, Arizona and Jacksonville, Florida."

These new concept stores showcase the company's distinct and innovative products while maintaining its convenient neighborhood locations for accessories and routine needs. The company plans to expand the test to 300 stores nationwide that are slated for renovation this year.

"In terms of corporate governance, RadioShack truly measures up to the highest standards ... and exceeds them," he said. "In fact, based on corporate governance criteria as measured by Institutional Shareholder Services, the world's leading provider of proxy voting and corporate governance services, RadioShack's corporate governance standards are roughly in the top 10 percent of Fortune 500 companies as well as in the top one percent of our industry. That's impressive, and, naturally, something we're all quite proud of."

28. On July 22, 2003, RadioShack issued a press release entitled "RadioShack

Corporation Announces Second Quarter 2003 Net Income of $57.5 Million, Up 11%," which stated:

RadioShack Corporation today announced second quarter net income of $57.5 million or $0.34 per diluted share for the quarter ended June 30, 2003, compared to net income of $51.8 million or $0.28 per diluted share for the quarter ended June 30, 2002. In 2002, the company also reported adjusted second quarter net income of $53.2 million or $0.29 per diluted share due to the effect of two litigation settlements.

Comparable store sales for the second quarter 2003 were up 3% compared to the prior year. Total sales in the second quarter 2003 were also up 3% to $1,025 million, compared to total sales of $998 million for the previous year. Wireless communications department sales for the second quarter of 2003 were up 14%.

"RadioShack's second quarter financials were primarily the result of striking a prudent balance between sales and profitability, as executed by our merchants and field associates," said Leonard Roberts, chairman and chief -16- executive officer of.RadioShack Corporation. "Strong sales in the wireless and toy departments combined with excellent profitability improvement in the computer and power-technical departments, made for very respectable financial results."

Inventory turnover through the second quarter of 2003 was 2.6 times versus 2.5 a year ago. Free cash flow was $221 million for the six-months ended June 30, 2003.

Financial Guidance

- For the third quarter of 2003, RadioShack anticipates generating diluted earnings per share of $0.27-$0.29.

- For the full year 2003, RadioShack anticipates earnings per share to be at least $1.63, representing a 15% increase over its full year adjusted 2002 earnings per share. The new 2003 forecast is $0.03 higher than previously anticipated and represents similar operating income assumptions with a slightly more favorable outlook for lines below operating income. The full year assumptions include:

- Approximately 3.5% to 4.0% growth in sales

- Wireless communications department growth will be notably higher than earlier estimates of 3%-to 4% -- -

- Collectively, the decline in the home entertainment, wired communications, and radio communications departments will be more pronounced than earlier expectations of "down slightly to flat."

- Gross margin improvement of 0 to 20 basis points

- SG&A growth of 3.5% to 4.0%

- Average year-end diluted shares of approximately 168 million.

29. On October 17, 2003, RadioShack issued a press release entitled "RadioShack

Corporation Board of Directors Authorizes 14% Dividend Increase, Odd-Lot Stock Buyback

Program," which stated:

RadioShack Corporation announced that its board of directors today declared an annual dividend of $0.25 per common share, 14% or $0.03 greater than that of the prior year. The dividend is payable December 26, 2003, to stockholders of record on December 8, 2003.

"This represents the 17th year in a row RadioShack has paid a dividend of equal or greater value versus the prior year," said Leonard Roberts, chairman and

-17- chief executive officer. "RadioShack is committed to driving total return for its stockholders through dividends, earnings growth, and share repurchases."

Separately, the RadioShack Corporation board of directors also approved an odd-lot stock buyback program. The voluntary program, also known as a small shareholder buyback program; -provides owners of fewer than 100 shares with a convenient, low-cost way to liquidate or round-up their positions to 100 shares.

30. On October 21, 2003, RadioShack issued a press release entitled "RadioShack

Corporation Announces Third Quarter 2003 Financial Results; Net Income Up 27%, E.P.S. Up

36%," which stated:

RadioShack Corporation today announced third quarter net income of $57 million or $0.34 per diluted share for the quarter ended September 30, 2003, compared to net income of $45 million or $0.25 per diluted share for the quarter ended September 30, 2002. Third quarter 2003 earnings per diluted share were favorably impacted by less than one cent from the net effect of a litigation settlement and costs related to the rationalization of certain manufacturing and installation businesses.

Comparable store sales for the third quarter 2003 were up 3% compared to the prior year. Total sales in the third quarter 2003 were up 2% to $1,064 million, compared to total sales of $1,047 million for the previous year. Wireless communications department sales for the third quarter of 2003 were up 12%. RadioShack drove increases in both total sales and gross margin percentage in the same quarter for the first time in 19 quarters.

"RadioShack is clearly on the right track. Third quarter financials were the result of striking a very prudent balance between sales and profitability," said Leonard Roberts, chairman and chief executive officer of RadioShack Corporation. "Our vendor initiatives, buying disciplines, and field execution are driving higher profit and better returns for our shareholders."

Inventory turnover through the third quarter of 2003 was 2.6 times versus 2.4 times a year ago. Free cash flow was $321 million for the nine-months ended September 30, 2003, compared to $217 million in the prior year. As for fourth quarter 2003 guidance, RadioShack anticipates generating diluted earnings per share of $0.67 - $0.70.

31. On January 14, 2004, RadioShack issued a press release entitled "RadioShack

Corporation Revises Fourth Quarter Earnings Per Share Guidance Higher," which stated:

RadioShack Corporation today announced that its fourth quarter 2003 earnings per share will exceed the high end of its previously stated forecast of $0.67 to $0.70. Additionally, the company reported that fourth quarter 2003 free

- is - cash flow will be approximately $420 million versus previous guidance of $310 million to $350 million.

The most significant driver of RadioShack's earnings results was better than expected gross margin. Factors impacting gross margin included:

- favorable merchandise mix,

- much higher profitability on similar products sold the previous year,

- better results from merchandise markdowns, and

- significant benefits from supply chain management initiatives.

"Product mix and other elements of our operating plan continue to positively impact our bottom line," said Leonard Roberts, Chairman and Chief Executive Officer. "We overcame light traffic trends and inclement weather by selling more profitably to deliver higher earnings and greater shareholder value."

RadioShack delivered value- to customers and shareholders by selling competitively priced, relevant products without compromising its financial model. In addition to the strong gross margin, slightly better-than-expected results from operating expenses contributed to the favorable fourth quarter earnings.

Lower sales results partially offset the benefits elsewhere on the income statement: RadioShack's fourth quarter 2003 total sales decreased 1%, to $1.48 billion from $1.50 billion in 4Q 2002. On a comparable store basis, sales were also down 1 % for the quarter.

32. On January 15, 2004, in response to these positive statements, RadioShack stock climbed from $30.35 to $32.49, an increase of 7.05%.

33. On January 16, 2004, RadioShack issued a press release entitled "RadioShack

Corporation Concludes Two-Day Institutional Investor Conference; Several Salient Points

Discussed," which stated:

RadioShack Corporation today concluded an institutional investor conference at its Fort Worth, Texas, headquarters. The conference, which began yesterday afternoon, featured presentations from four of the company's senior executives: Mike Newman, senior vice president and chief financial officer; Arvin Goldberg, chief business operations officer; Dave Edmondson, president and chief operating officer; and Len Roberts, chairman and chief executive officer.

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Some of the more salient points made at the conference included the following:

- The company anticipates 2004-2005 growth in the following: sales, 3% to 4%; gross margin, 50 to 70 basis points; SG&A expenses, 1.5% to 2.5%; operating income, 10% to 13% and; earnings per share, 13% to 15%.

- RadioShack has terminated its exclusive agreement with RCA and will repurpose approximately 18 linear feet of home entertainment space in all of its stores.

- About 10 linear feet will be used for a broader assortment of home entertainment products and brands, including RCA.

- The remainder will be used for higher-margin product categories such as personal electronics, accessories, and power products.

- The wireless department is estimated to grow at a CAGR for 2004- 2005 of 5% - 8%. Number portability could provide important opportunity for incremental growth in this department.

- Other 2004-2005 departmental sales CAGR projections were: wired communications , (-4%) - (-5%); radio communications , 0% - 2%; computer, 5% - 7%; home entertainment, 0%; power & technical, 4% - 5%; toys/personal electronics/personal audio, 3% - 5%.

-The -company- will deploy disproportionate amounts of resources towards six focus areas in 2004: the connected home, power, digital imaging, wireless (handsets plus related products and services), gifts & toys, and wellness.

- RadioShack dropped DirecTV from its satellite television offering and is now selling only Dish Network service. RadioShack believes this will have a neutral-to-slightly positive impact upon its satellite business.

- Benefits from RadioShack's strategic pricing initiative should accelerate in 2004:

Initiative generated $6 million to $7 million of incremental gross profit in 2003.

- Initiative impacts about 500 stock keeping units today and approximately 1,500 by the end of 2004.

- This year the company expects to institute zone, or local market, pricing (phase 2) and more scientifically manage its markdown and sale processes (phase 3).

- Inventory turnover for 2004 is anticipated to be 2.8 to 2.9 turns.

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- Free cash flow for the years-ended 2003, 2004, and 2005 are anticipated to be approximately $420 million, $72 million, and $250 million, respectively.

- Radio Shack's supply chain initiatives contributed approximately $40 million in operating income benefit in 2003. They are expected to contribute another $25 million in 2004.

- The company's new prototype stores have scored very favorably with consumers in independent research. Today, there are 231 new prototype locations and RadioShack plans on having 300-400 more in 2004.

- RadioShack is working on 2005 business drivers today:

- Focusing on technologies that play to RadioShack's strengths (e.g. power, communications, connected home).

Building relationships with technology partners worldwide (e.g. Mobility Electronics , Israel-based E.N.T.).

- Looking for licensing or exclusivity opportunities in return for accelerating adoption rates through its 7,000 locations.

- Aiming to develop new sources of residual revenue.

34. On February 19, 2004, RadioShack issued a press release entitled "RadioShack

Corporation Announces Fourth Quarter and Year-End 2003 Financial Results; Fourth Quarter

Net Income Up 17%, E.P.S. Up 22%," which stated:

RadioShack Corporation today announced fourth quarter net income of $127 million or $0.77 per diluted share for the quarter ended December 31, 2003. This compares to net income of $109 million or $0.63 per diluted share for the quarter ended December 31, 2002. Last year the company also reported adjusted fourth quarter 2002 net income of $102 million or $0.59 per diluted share, due primarily to an unusual gain from a contract termination.

Comparable store sales for the fourth quarter 2003 were flat compared to the prior year. Total sales in the fourth quarter 2003 were also flat at $1,490.4 million, compared to total sales of $1,497.7 million for the previous year.

"Improved management of product mix, supply chain initiatives, markdowns, along with other factors related to gross margin, favorably impacted our quarterly earnings beyond our expectations," said Leonard Roberts, chairman and chief executive officer of RadioShack Corporation. "Our organizational disciplines in buying, pricing, staffing and other areas are driving higher profit and better returns for our shareholders. These disciplines will bode well for us in 2004 and beyond."

-21- Inventory turnover for the full year of 2003 was 2.7 times versus 2.5 times a year ago. Free cash flow was $422 million for the 12 months ended December 31, 2003, compared to $375 million in the prior year.

RadioShack reported full year 2003 net income of $298 million, or $1.77 per diluted share, versus net income of $263 million, or $1.45 per diluted share the previous year. Excluding unusual items, 2002 net income was $258 million, or $1.42 per diluted share. Sales for 2003 were $4,649 million, up 2% versus $4,577 million the previous year.

As for financial guidance, RadioShack anticipates generating first quarter 2004 earnings per share of $0.36 to $0.38. Earnings per diluted share for fiscal year 2004 are anticipated to grow 13% to 15% year-over-year to at least $1.99. This annual earnings per share growth is predicated upon sales growth of 3% to 4%, gross margin gains of 50 to 70 basis points, and SG&A growth of 1.5 to 2.5%.

35. On February 19, 2004, in response to these positive statements, RadioShack stock

climbed from $33.31 to $ 35.41, an increase of 6.3%. ,

36. On March 12, 2004, RadioShack issued a press release entitled "RadioShack

Corporation Chairman and Chief Executive Officer Adopts 10b5-1 Plan," which announced:

Leonard H. Roberts; the company's chairman and chief executive officer, has adopted a pre-arranged, systematic trading plan to sell company shares in accordance with guidelines specified by Rule lObs-1 under the Securities and Exchange Act of 1934 and by RadioShack's policies with respect to insider sales.

Rule 10b5-1 permits officers and directors of public companies to adopt pre-determined plans for selling specified amounts of stock. The plans may be entered into only when the director or officer is not in possession of material, nonpublic information and may be used to gradually diversify investment portfolios over a period of time.

The 10b5-1 plan provides for Roberts' exercise and sell of 375,000 employee stock options over a period of seven months beginning June 1, 2004. This represents approximately 10 percent of Roberts' more than 3.6 million vested and unvested stock options as of December 31, 2003.

This trading plan enables Roberts to diversify his personal assets while continuing to stay aligned with the interests of shareholders. Roberts said, "I am bullish on the long-term growth prospects of RadioShack. I am adopting the 10b5-1 plan on the recommendation of my financial advisors as a way of achieving prudent diversification on behalf of my family's investments while not appreciably diluting my interests in the company."

-22- 37. On or about April 13, 2004, RadioShack distributed its Annual Report to shareholders, which stated in part:

In my letter to you last year, I described several merchandising and operational initiatives, including improved supply chain and store processes, that we believed would help deliver 2003 earnings per share (EPS) growth of 13-15%. I am pleased to be able to report to you that not only did we meet those goals in 2003 - we exceeded them.

Our sales grew 2%, in line with our expectations. Our gross margin increased by 91 basis points - ahead of our expectations - due primarily to strong results from our supply chain initiative. Our selling, general and administrative expenses rose just 1%, also exceeding our expectations, as a result of many company-wide initiatives to reduce costs and exiting several businesses that did not deliver shareholder value. Overall, in 2003 we delivered EPS growth of 22%, which in turn helped drive a 64% increase in the value of RadioShack stock. Coupled with a 14% dividend increase in 2003, your stock saw a total return in 2003 of 65%.

Staying On Strategy

I am convinced that the main, over-arching reason why we delivered on our financial promises in 2003 (and what we believe will make us successful in the future) is that we stayed true to our strategy "to dominate cost-effective solutions to meet everyone's routine electronics needs and families' distinct electronics wants."

This is the long-term direction of our organization, and we know we have a long way to go until we literally fulfill our strategy. While we didn't expect to dominate any consumer electronics categories by year's end, our merchandising, marketing and store operations decisions were all reasonably well-aligned with this strategy statement.

We clearly met customers' routine needs for wireless communications, for example, and posted 14% annual sales growth in this department. Our most successful results tend to come from categories that are small cube, can be accessorized, require answers, and are convenience-driven. The wireless business certainly plays to those characteristics. Our wireless business succeeded because customers embraced our formidable product offerings and store associates executed well. Our merchants have also become highly skilled at securing, pricing and distributing these products. In 2004, we think wireless will have another good year due in part to a new product cycle and more accessory bundles. -23- We also drove good sales and gross profit results from categories such as digital imaging, power, wellness, and the connected home. Like wireless, these categories play to RadioShack's strengths in that they are all small cube and accessory-ready, driven by convenience and require answers. Ongoing commitment to these categories will further our strategy and give RadioShack its best opportunities for long-term financial success.

In 2003, we did make significant moves to fulfill the "cost-effective solutions" element of our strategy. We exited certain manufacturing operations which were not core to our strategy and were providing insufficient returns. We consolidated, closed, or sold six different businesses, including our installation, signs, fixtures, and wire and cable units. The favorable cost impact from these moves should be felt for most of 2004. In addition, we realized payroll savings of approximately $12 million from labor scheduling, simply through more meticulous focus on and accountability for productivity results.

Supply chain management lowered costs and optimized inventory, primarily by securing better terms from vendors and tying our organization's focus and compensation to more appropriate merchandising metrics.

RadioShack clearly developed a more efficient supply chain in 2003. RadioShack now gets products into its stores more efficiently and at lower prices than ever before. The company can react better to meet customer demand, too. RadioShack has created a streamlined supply chain which is better serving our customers and shareholders alike.

Opportunities to Drive Shareholder Value

While it did help us to drive better earnings, our focus on process improvement during 2003 was not without missteps and mistakes. During our highest volume time of year (fourth quarter), we did not have enough traffic- driving, low-priced promotional offers. In addition, we did not buy aggressively enough on many hot, fast-moving products.

Now that we are sourcing product more effectively, we can maintain our margins in 2004 as we pick our spots to be more competitive on price. We are now in a better position to select traffic-driving product that can be more promotional, and we expect to drive accessory add-on opportunities, too. We also think we can further optimize the balance between sales, earnings, and use of working capital by taking calculated risks to be deeper in more product categories and by changing our advertising mix to more effectively reach our target audiences.

Our new store prototype is another opportunity to drive value in 2004. We ended 2003 with 232 prototype stores. These stores have superior sight lines with

-24- more contemporary colors and signs. There is also an attractive point of sale in the middle of the store that brings product out from behind glass counters and instead displays them within easy reach of our customers. Checkout is convenient and customers are drawn further into the store. Research suggests that customers find the new format neater and are more willing to return to it versus the older format. Customers even perceive a greater selection and value in the new format, despite the reality that the products and prices are no different from any other store.

While these soft improvements have yet to translate into a consistently satisfactory financial performance, the financial results do suggest it is worthwhile to launch more new format stores at a rate consistent with our normal commitment to store capital expenditures. In 2004, we anticipate the rollout of a least another 300 new format stores. And having consolidated our fixtures unit, we may see incremental financial improvement by outsourcing production of the new format fixtures.

In 2004, we anticipate a significant opportunity to drive sales productivity. Having terminated our exclusive agreement with RCA, vast options are now opened -up to drive -sales from the space - formerly dedicated solely to RCA products. This year for each store, we expect to do nearly equal sales of home entertainment products in about 14 linear feet of space versus the 22 linear feet of space dedicated to home entertainment in 2003. This will be possible by carrying new products with superior brands in the smaller space. The remaining eight feet will be used to drive one or more of our 2004 priority merchandising categories which include power, gifts and toys, and wellness, among others.

Our new product development, or technology innovation phase of our growth, will begin to make modest contributions to sales and earnings growth this year. Our plan is for benefits to become material in late 2005 or beyond. The focus for now is to be actively engaged with entities worthwhile at the cutting edge of technology development to source and sell new products in our core areas of strength, such as power and communications.

The Outlook

By staying true to our strategy again in 2004, RadioShack anticipates driving further value for you, our shareholders. We expect 2004 EPS growth to be 13% to 15%. This growth is based on:

> Sales growth of 3% to 4%;

> Gross margin improvement of 50 to 70 basis points;

> SG&A expense growth of 1-1/2 % to 2-1/2%; and

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